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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
THESECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2008

OR

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THEEXCHANGE 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 the Exchange 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 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 September 12, 2008, 68,588,549 common shares of the
Registrant were issued and outstanding.

Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [ X ]

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CARBIZ INC.

FORM 10-Q

For the Quarterly Period Ended July 31, 2008

INDEX

|PART I        | Financial
      Information                                                                 |   
|------------- | ------------------------------------------------------------------------------------------- | --
|Item
      1. | Financial
      Statements                                                                  | 1 
|Item
      2. | Managements
      Discussion and Analysis of Financial Condition and Results of Operations | 17
|Item
      4. | Controls
      and Procedures                                                               | 25
|              |                                                                                             |   
|PART II       | Other Information                                                                           |   
|Item
      1. | Legal
      Proceedings                                                                     | 25
|Item
      2. | Unregistered
      Sales of Equity Securities and Use of Proceeds                           | 25
|Item
      3. | Defaults
      Upon Senior Securities                                                       | 25
|Item
      4. | Submission
      of Matters to a Vote of Security Holders                                   | 26
|Item
      5. | Other
      Information                                                                     | 26
|Item
      6. | Exhibits                                                                                    | 26

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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-KSB, 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.

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**PART 1 FINANCIAL INFORMATION**

**Item 1. Financial
Statements**

|CARBIZ INC.                          
|-------------------------------------
|Condensed Consolidated Balance Sheets
|(Unaudited)                          
|(expressed in
      U.S. dollars)    

|                                                                      |   | July
      31, 2008 |   |   | January 31, 2008 |  
|--------------------------------------------------------------------- | - | ------------------- | - | - | ---------------- | -
|                                                                      |   | (unaudited)         |   |   |                  |  
|ASSETS                                                                |   |                     |   |   |                  |  
|CURRENT                                                               |   |                     |   |   |                  |  
|Cash and cash
      equivalents                                       | $ | 374,894             |   | $ | 1,141,271        |  
|Accounts receivable                                                   |   | 41,905              |   |   | 84,916           |  
|Current portion
      of notes receivable                             |   | 15,522,756          |   |   | 16,389,259       |  
|Inventory                                                             |   | 4,546,924           |   |   | 2,554,836        |  
|Prepaids and
      other assets                                       |   | 247,074             |   |   | 465,500          |  
|Deferred costs                                                        |   | -                   |   |   | 3,707            |  
|                                                                      |   | 20,733,553          |   |   | 20,639,489       |  
|NOTES RECEIVABLE, NET LESS CURRENT PORTION                            |   | 8,358,407           |   |   | 8,649,284        |  
|DEFERRED FINANCING COSTS                                              |   | 976,950             |   |   | 1,362,593        |  
|PROPERTY AND EQUIPMENT                                                |   | 823,787             |   |   | 767,995          |  
|GOODWILL                                                              |   | 438,283             |   |   | 438,283          |  
|                                                                      | $ | 31,330,980          |   | $ | 31,857,644       |  
|                                                                      |   |                     |   |   |                  |  
|LIABILITIES                                                           |   |                     |   |   |                  |  
|CURRENT                                                               |   |                     |   |   |                  |  
|Accounts payable and accrued
      liabilities                        | $ | 3,343,022           |   | $ | 3,078,560        |  
|Note payable,
      related party                                     |   | 200,000             |   |   | 200,000          |  
|Current portion of long-term
      debt:                              |   |                     |   |   |                  |  
|Lines of credit                                                       |   | 14,831,332          |   |   | 17,580,169       |  
|Inventory
      floor plan                                            |   | 5,483,169           |   |   | 1,421,151        |  
|Current portion
      of capital leases                               |   | 3,996               |   |   | 8,104            |  
|Current portion of convertible
      debentures                       |   | 1,572,980           |   |   | 435,597          |  
|Derivative
      liabilities                                          |   | 4,628,207           |   |   | 8,844,036        |  
|Deferred revenue                                                      |   | 150                 |   |   | 59,753           |  
|                                                                      |   | 30,062,856          |   |   | 31,627,370       |  
|                                                                      |   |                     |   |   |                  |  
|CAPITAL LEASES, NET OF CURRENT PORTION                                |   | 2,621               |   |   | 2,621            |  
|CONVERTIBLE DEBENTURE, LESS CURRENT PORTION                           |   | 159,707             |   |   | 312,405          |  
|Includes $49,283 and $25,093 respectively to related parties          |   |                     |   |   |                  |  
|LONG-TERM DEBT, LESS CURRENT PORTION                                  |   | 16,752,837          |   |   | 17,423,298       |  
|                                                                      |   | 46,978,021          |   |   | 49,365,694       |  
|                                                                      |   |                     |   |   |                  |  
|COMMITMENTS AND CONTINGENCIES (Note 12)                               |   | -                   |   |   | -                |  
|                                                                      |   |                     |   |   |                  |  
|STOCKHOLDERS' DEFICIENCY                                              |   |                     |   |   |                  |  
|COMMON SHARES                                                         |   | 16,274,119          |   |   | 16,274,119       |  
|Unlimited shares authorized, 65,868,549 and 64,870,681 common shares  |   |                     |   |   |                  |  
|issued and
      outstanding as at July 31, 2008 and January 31, 2008 |   |                     |   |   |                  |  
|ADDITIONAL PAID-IN CAPITAL                                            |   | 7,984,066           |   |   | 7,679,205        |  
|ACCUMULATED OTHER COMPREHENSIVE LOSS                                  |   | (385,197            | ) |   | (385,197         | )
|ACCUMULATED DEFICIT                                                   |   | (39,520,029         | ) |   | (41,076,177      | )
|                                                                      |   | (15,647,041         | ) |   | (17,508,050      | )
|                                                                      | $ | 31,330,980          |   | $ | 31,857,644       |  

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)                                    
|(expressed in
      U.S. dollars)              

|                                                      |   | For the three months ended |   |   | For the six months ended |  
|----------------------------------------------------- | - | -------------------------- | - | - | ------------------------ | -
|                                                      |   | July 31,                   |   |   | July 31,                 |  
|                                                      |   | 2008                       |   |   | 2007                     |  
|SALES                                                 |   |                            |   |   |                          |  
|Used car sales                                        | $ | 6,909,797                  |   | $ | 341,760                  |  
|Software and consulting services (Note
      9)       |   | 412,942                    |   |   | 581,674                  |  
|Interest income                                       |   | 1,461,209                  |   |   | 19,957                   |  
|                                                      |   | 8,783,948                  |   |   | 943,391                  |  
|COST OF SALES                                         |   |                            |   |   |                          |  
|Used car sales                                        |   | 5,100,731                  |   |   | 275,189                  |  
|Software and consulting
      services                |   | 274,951                    |   |   | 243,652                  |  
|                                                      |   | 5,375,682                  |   |   | 518,841                  |  
|GROSS PROFIT                                          |   | 3,408,266                  |   |   | 424,550                  |  
|                                                      |   |                            |   |   |                          |  
|Gain on debt foregiveness                             |   | -                          |   |   | -                        |  
|Personnel expenses                                    |   | 654,486                    |   |   | 288,887                  |  
|Selling expenses                                      |   | 202,928                    |   |   | 116,875                  |  
|Professional fees                                     |   | 178,305                    |   |   | 268,113                  |  
|Provision for credit losses                           |   | 2,403,110                  |   |   | 18,239                   |  
|Other operating expenses                              |   | 1,086,190                  |   |   | 871,869                  |  
|                                                      |   | 4,525,019                  |   |   | 1,563,983                |  
|OPERATING LOSS                                        |   | (1,116,753                 | ) |   | (1,139,433               | )
|                                                      |   |                            |   |   |                          |  
|INTEREST AND OTHER EXPENSES                           |   | (1,877,114                 | ) |   | (149,430                 | )
|GAIN (LOSS) ON DERIVATIVE LIABILITIES                 |   | 2,010,476                  |   |   | (1,430,363               | )
|GAIN ON SALE OF SOFTWARE DIVISION                     |   | 2,514,229                  |   |   | -                        |  
|MINORITY INTEREST IN LOSSES                           |   | -                          |   |   | 7,128                    |  
|NET INCOME (LOSS) FOR THE PERIOD                      | $ | 1,530,838                  |   | $ | (2,712,098               | )
|NET INCOME (LOSS) PER SHARE (basic and
      diluted) | $ | 0.02                       |   | $ | (0.04                    | )
|                                                      |   |                            |   |   |                          |  
|WEIGHTED AVERAGE NUMBER OF COMMON                     |   |                            |   |   |                          |  
|SHARES OUTSTANDING (Basic)                            |   | 65,809,853                 |   |   | 64,224,404               |  
|WEIGHTED AVERAGE NUMBER OF COMMON                     |   |                            |   |   |                          |  
|SHARES OUTSTANDING (Diluted)                          |   | 66,759,852                 |   |   | 64,224,404               |  

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)                                    
|(expressed in
      U.S. dollars)              

|                                                                         |   | For the Six Months Ended |  
|------------------------------------------------------------------------ | - | ------------------------ | -
|                                                                         |   | July
      31, 2008      |  
|NET INFLOW (OUTFLOW) OF CASH RELATED                                     |   |                          |  
|TO THE FOLLOWING ACTIVITIES:                                             |   |                          |  
|OPERATING ACTIVITIES                                                     |   |                          |  
|Net income (loss)                                                        | $ | 1,556,148                |  
|Items not affecting cash                                                 |   |                          |  
|Depreciation of property and equipment                                   |   | 79,678                   |  
|Minority interest                                                        |   | -                        |  
|(Gain) loss on derivative liabilities                                    |   | (4,044,834               | )
|Gain on debt
      forgiveness                                           |   | -                        |  
|Gain on sale of software operations                                      |   | (2,514,229               | )
|Amortization of
      deferred financing costs                           |   | 340,973                  |  
|Amortization of debt discount                                            |   | 1,051,383                |  
|Share-based
      compensation                                           |   | 187,290                  |  
|Provision for bad debts                                                  |   | 4,134,151                |  
|                                                                         |   |                          |  
|Net changes in
      operating assets and liabilities:                   |   |                          |  
|Accounts
      receivable                                                |   | 25,116                   |  
|Notes receivable                                                         |   | (2,979,897               | )
|Prepaids and other
      assets                                          |   | 210,926                  |  
|Inventory                                                                |   | (1,992,088               | )
|Deferred costs                                                           |   | 2,490                    |  
|Accounts payable and accrued liabilities                                 |   | 345,943                  |  
|Deferred revenue                                                         |   | -                        |  
|NET CASH FLOWS FROM
      OPERATING ACTIVITIES                           |   | (3,596,950               | )
|INVESTING ACTIVITIES                                                     |   |                          |  
|Proceeds from sale of
      software operations                          |   | 2,500,000                |  
|Acquisition of property and equipment                                    |   | (153,493                 | )
|NET CASH FLOW FROM
      INVESTING ACTIVITIES                            |   | 2,346,507                |  
|FINANCING ACTIVITIES                                                     |   |                          |  
|Repayment of capital
      leases                                        |   | (4,108                   | )
|Proceeds from credit facilites, net                                      |   | 642,720                  |  
|Repayment of
      convertible debentures                                |   | (154,211                 | )
|Repayment of related party debt                                          |   | -                        |  
|Proceeds from Trafalgar
      debenture, including derivative components |   | -                        |  
|Payment of deferred financing costs                                      |   | -                        |  
|NET CASH FLOWS FROM
      FINANCING ACTIVITIES                           |   | 484,401                  |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                  |   |                          |  
|AND CASH
      EQUIVALENTS                                               |   | (335                     | )
|INCREASE (DECREASE) IN CASH AND                                          |   |                          |  
|CASH EQUIVALENTS                                                         |   | (766,377                 | )
|CASH AND CASH EQUIVALENTS,                                               |   |                          |  
|BEGINNING OF
      PERIOD                                                |   | 1,141,271                |  
|CASH AND CASH EQUIVALENTS,                                               |   |                          |  
|END OF PERIOD                                                            | $ | 374,894                  |  

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
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (a) Business and organization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Carbiz Inc. (the Company) was incorporated pursuant to
      the provisions of the Business Corporations Act of Ontario (OBCA) under
      the name Data Gathering Capital Corp.on March 31, 1998. On September 1,
      1999, the Company changed its name by articles of amendment under the OBCA
      to Carbiz.com Inc., and then changed its name again on July 15, 2003 to
      Carbiz Inc. As of October 3, 2006, the Companys common shares are quoted
      on the United States Over the Counter Bulletin Board. Prior to such date,
      the Companys common shares were traded on the TSX Venture Exchange
      (TXSV), formerly the Canadian Venture Exchange (CDNX).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In the opinion of management, all adjustments, consisting
      of normal recurring adjustments, have been made in the July 31, 2008 and
      2007 financial statements, which are necessary for a fair financial
      statement presentation. The results for the three and six months ended
      July 31, 2008 and 2007 are not necessarily indicative of financial
      operations for the full year. These financial statements are combined and
      condensed. For further information, refer to the financial statements and
      footnotes in the Companys audited financial statements for the year ended
      January 31, 2008 which are included in the Companys Form 10-KSB filed
      with the U.S. Securities and Exchange Commission (the SEC) on April 30,
      2008 (January 31, 2008 Form 10-KSB). The year-end condensed consolidated
      balance sheet data was derived from audited financial statements, but does
      not include all disclosures required by accounting principles generally
      accepted in the United States of America.                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | References to the Company typically include the Companys
      consolidated subsidiaries and joint venture. The Companys operations are
      principally conducted through its five operating subsidiaries, Carbiz USA,
      Inc., a Delaware corporation, Carbiz Auto Credit, Inc. (CAC), Carbiz
      Auto Credit, AQ Inc. (AQ), Texas Auto Credit, Inc. (Texas Auto) (CAC,
      AQ and Texas Auto are all Florida corporations) and Carbiz Auto Credit
      JV1, LLC, a Florida limited liability company (JV1). Collectively,
      Carbiz Inc., Carbiz USA, Inc., CAC , AQ, Texas Auto, and JV1 are referred
      to herein as Carbizor the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | All dollar figures presented in this report are
      denominated in U.S. dollars unless otherwise indicated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company is in the business of selling and financing
      used automobiles. Until recently it was also developing, marketing,
      distributing and supporting software and Internet products for the
      automotive sales finance industry. During the three and six months ended
      July 31, 2008, the Company operated 26 dealerships which sell and finance
      used automobiles. Included in the 26, are 23 locations acquired on October
      1, 2007 throughout the Midwest in Illinois, Indiana, Iowa, Kentucky,
      Nebraska, Ohio and Oklahoma in addition to the two dealerships it operates
      in Florida and one in Texas. The Company began operation of its Texas
      location on December 24, 2007 with the purchase of a portfolio of used
      automobile and light truck loans, and an inventory of used automobiles and
      light trucks located in Houston, Texas. Sales operations for the Texas
      location were not authorized by the State of Texas until March 28, 2008.
      On January 24, 2007 the Company purchased the remaining 50% share of
      Carbiz Auto Credit JV1, LLC that it did not previously own. On July 2,
      2008 the Company sold certain assets and liabilities related to the
      software operation that were used in the development, marketing,
      distribution and support of software and Internet products for the
      automotive sales finance industry. It did retain its automotive consulting
      business.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (b) Going concern assumption                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | While these condensed consolidated financial statements
      have been prepared on the basis of accounting principles applicable to a
      going concern, several adverse conditions and events cast substantial
      doubt upon the validity of this assumption.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

The Company has incurred losses in the
current periods (exclusive of gains on derivative instruments and the sale of
the software operations in 2008) and in each of the past several years. The
Company had a working capital deficiency of $9,329,303 at July 31, 2008. The
Companys continued existence is dependent upon its ability to achieve
profitable operations and to obtain additional financing. The Company believes
that the new dealerships, combined with its existing

4

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|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | consulting business will improve its operating cash flows
      going forward. However, there can be no assurance that the Company will
      achieve profitable operations or that financing efforts will be
      successful.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | If the going concern assumptions were not appropriate to
      these condensed consolidated financial statements, then adjustments would
      be necessary in the carrying values of assets and liabilities, the
      reported net income and the balance sheet classifications used.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In addition, the Amended Credit Agreement contains
      financial covenants which require, among other things, that the Company
      maintain specified interest coverage and loss to liquidation ratios, and
      meet certain specified minimum net income, loan loss and collection
      requirements. The Company and the lender have agreed to continue to
      negotiate regarding certain additional financial covenants relating to
      maintenance of specific leverage ratios and minimum tangible net worth
      requirements. It is anticipated the agreement on the covenants will be
      reached within a reasonable time. However, these discussions have been
      ongoing since December 2007. If an agreement on such additional covenants
      is not reached within a reasonable time, it may constitute a default under
      the Amended Credit Agreement, which could result in the lender demanding
      the repayment of approximately $37,427,000 currently due under the Amended
      Credit Facility.                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (c) Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These condensed consolidated financial statements have
      been prepared in accordance with accounting principles generally accepted
      in the United States of America (GAAP) and reflect the following
      significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Accounts and notes receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Accounts and notes receivable shown are net of bad debt
      provisions. The amount includes short term notes received through the sale
      of used automobiles. The notes are for terms ranging from 80 weeks to 48
      months and some require weekly payments. Interest is calculated weekly
      based on the balance outstanding at the time. The allowance for doubtful
      accounts reflects the Companys best estimate of probable losses inherent
      in the accounts and notes receivable balances. The Company determines the
      allowance based on known troubled accounts, historical experience, and
      other currently available evidence.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company takes steps to repossess a vehicle when the
      customer becomes severely delinquent in his or her payments, and
      management determines that timely collection of future payments is not
      probable. Accounts are charged off after the expiration of a statutory
      notice period for repossessed accounts, or when management determines that
      the timely collection of future payments is not probable for accounts
      where the Company has been unable to repossess the automobile.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | For accounts where the automobile was repossessed, the
      fair value of the repossessed automobile is charged as a reduction of the
      gross finance receivable balance written-off. 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 maintains an allowance for credit losses on
      an aggregate basis at a level it considers sufficient to cover estimated
      losses in the collection of its finance receivables. The allowance for
      credit losses is based primarily upon historical credit loss experience,
      with consideration given to recent credit loss trends and changes in loan
      characteristics (i.e., average amount financed and term), 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 for credit losses, the Company believes that it has given
      appropriate consideration to all relevant factors and has made reasonable
      assumptions in determining the allowance for credit
  losses.

5

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)
|-- | ----------------------------------------------------------------------------

A comparison of the following
classifications of notes receivable related to auto sales at July 31, 2008 and
2007 is presented below:

| | Florida stores portfolio:              | July 31,
| | -------------------------------------- | --------
| |                                        |         
| |                                        |         
| | Active accounts                        | $       
| | Accounts held in repossession          | $       
| | Accounts written off during six months | $       

| | Midwest stores portfolio               |   | July 31, 2008 |  |  |        |  |  |  | 
| | -------------------------------------- | - | ------------- |  |  | ------ |  |  |  | 
| |                                        |   | Amount        |  |  | Number |  |  |  | 
| | Active accounts                        | $ | 18,346,408    |  |  | 4454   |  |  |  | 
| | Accounts held in repossession          | $ | 602,180       |  |  | 137    |  |  |  | 
| | Accounts written off during six months | $ | 3,912,754     |  |  | 991    |  |  |  | 

| | Texas portfolio:                       |   | July 31, 2008 |  |  |        |  |  |  | 
| | -------------------------------------- | - | ------------- |  |  | ------ |  |  |  | 
| |                                        |   | Amount        |  |  | Number |  |  |  | 
| | Active accounts                        | $ | 9,670,407     |  |  | 994    |  |  |  | 
| | Accounts held in repossession          | $ | 605,105       |  |  | 52     |  |  |  | 
| | Accounts written off during six months | $ | 1,798,204     |  |  | 221    |  |  |  | 

Inventory

Inventory consists of used vehicles and
is related to the CAC, AQ, and Texas Auto operations. Inventory is stated at the
lower of cost or net realizable value. Cost is determined on a specific item
basis.

Deferred finance costs

Deferred finance costs include fees
paid in conjunction with the issuance of convertible debentures and entering
into term loans, lines of credit, and inventory floor plans and are amortized
over the term of the related financial instruments. Approximate future
amortization of deferred finance costs is as follows as of July 31, 2008:

Periods ending July 312009
    $
    460,1512010
    
    248,9682011
    
    233,3332012
    
    34,498Thereafter
    
    -$
    976,950


6

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                               
|   | Net income per share                                                                                                          
|   |                                                                                                                               
|   | The following table reconciles the numerators and
      denominators of the basic and diluted income per share
  computations.

| |                                                                 |   | Three Months Ended July 31 |  |   | Six Months Ended July 31 |  
| | --------------------------------------------------------------- | - | -------------------------- |  | - | ------------------------ | -
| |                                                                 |   | 2008                       |  |   | 2007                     |  
| | Net income attributable to common
      stockholder-(numerator) | $ | 1,530,838                  |  | $ | (2,712,098               | )
| | Basic:                                                          |   |                            |  |   |                          |  
| | Weighted average shares
      outstanding (denominator)         |   | 65,809,853                 |  |   | 64,224,404               |  
| | Net income per common share - basic                             | $ | 0.02                       |  | $ | (0.04                    | )
| | Diluted:                                                        |   |                            |  |   |                          |  
| | Weighted average shares outstanding - basic                     |   | 65,809,853                 |  |   | 64,224,404               |  
| | Effect of dilutive securities                                   |   | 949,999                    |  |   | -                        |  
| | Adjusted wieghted average share (denominator)                   |   | 66,759,852                 |  |   | 64,224,404               |  
| | Net income per common share (diluted)                           | $ | 0.02                       |  | $ | (0.04                    | )

The effects of all stock options and
warrants outstanding have been excluded from Common Stock equivalents because
their effect would be anti-dilutive. At July 31, 2008, 8,438,041 options and
31,923,604 warrants were outstanding.

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
weighted average of the historical volatility of the Companys stock measured on
a once monthly basis over the expected term of the options. The expected term of
options granted 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 rate is based on the U.S. Treasury yield curve in effect at the time
of grant for the period of the expected term.

No stock options were granted during
the six months ended July 31, 2008.

During the six months ended July 31,
2008, the Company recognized share-based compensation expense of $36,179 for
stock options previously granted to employees, $39,000 for incentive stock
granted to employees and $47,511 of expense for stock previously granted to
consultants for services rendered under a contract with a term which required
the amortization of the total expense.

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 680,000 shares have been
vested as of July 31, 2008. During the six months ended July 31, 2008 the
Company recognized share-based compensation expense of $64,600 as a result of
this restricted stock grant.

Total options outstanding and vested at
July 31, 2008 were 3,958,041.

7

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)    
|-- | --------------------------------------------------------------------------------
|   |                                                                                 
|   | Weighted average exercise price and weighted average life
      were as follows:

Number of
    Weighted
    Weighted AverageOptions
    Average Life (Yrs)
    Exercise Price1998 Plan   *
    2,838,041
    0.8
    $0.252007 Plan
    1,120,000
    3.5
    $0.13Total
    3,958,041


(*) This 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 July 31, 2008.

The market value of the Companys
common stock at July 31, 2008 was $0.10; therefore the intrinsic value of all
options outstanding and vested at July 31, 2008 was $0. In addition, non-vested
options to purchase 4,480,000 shares were outstanding at July 31, 2008 with a
weighted average exercise price of $0.13 per share and a weighted average life
of 3.5 years. The Company will record $349,720 of additional compensation
expense during the subsequent 42 months for non-vested options outstanding as of
July 31, 2008.

Recent accounting
pronouncements

In March 2008, the FASB issued SFAS No.
161, Disclosures about Derivative Instruments and Hedging Activities(SFAS 161). This statement requires companies to provide enhanced
disclosures about (a) how and why they use derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect a companys financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. The Company will adopt the new disclosure requirements on or before
the required effective date and thus will provide additional disclosures in its
consolidated financial statements when adopted.

In April 2008, FASB Staff Position No.
142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3) was
issued. This standard amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under FASB Statement No. 142, Goodwill and Other
Intangible Assets. FSP 142-3 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. Early adoption is prohibited. The Company does not expect the
adoption of FSP 142-3 to have a material effect on its financial statements.

In May 2008, the FASB issued Statement
of Financial Accounting Standards (SFAS) No. 162, The Hierarchy of
Generally Accepted Accounting Principles. This standard is intended to
improve financial reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with generally accepted accounting principles
in the United States for non-governmental entities. SFAS No. 162 is effective 60
days following approval by the U.S. Securities and Exchange Commission (SEC)
of the Public Company Accounting Oversight Boards amendments to AU Section 411,
The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. The Company does not expect SFAS No. 162 to have a
material impact on the preparation of the consolidated financial statements.

In May 2008, the Financial Accounting
Standards Board (FASB) affirmed the consensus of FASB Staff Position APB 14-1
(FSP APB 14-1), Accounting for Convertible Debt Instruments That May Be Settled
in Cash upon Conversion (Including Partial Cash Settlement), which applies to
all convertible debt instruments that have a net settlement feature, which
means that such convertible debt instruments, by their terms, may be settled
either wholly or partially in cash upon conversion. FSP APB 14-1 requires
issuers of convertible debt instruments that may be settled wholly or partially
in cash upon conversion to separately account for the liability and equity
components in a manner reflective of the issuersnonconvertible debt borrowing
rate. FSP APB 14-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and

8

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)
|-- | ----------------------------------------------------------------------------

interim periods within those fiscal
years. Early adoption is not permitted and retroactive application to all
periods presented is required. The Company has not determined the impact on its
financial statements of this accounting standard.

Fair value disclosure

In September 2006, the FASB issued
Statement of Financial Accounting Standards No. 157, Fair Value
Measurements(Statement No. 157) which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value
measurements. Statement No. 157 applies to other accounting pronouncements that
require or permit fair value measurements and does not require any new fair
value measurements.

In February 2008, the FASB issued FASB
Staff Position 157-2, which provides for a one-year deferral of the provisions
of Statement No. 157 for non-financial assets and liabilities that are
recognized or disclosed at fair value in the consolidated financial statements
on a non-recurring basis. The Company is currently evaluating the impact of
adopting the provisions of Statement No. 157 for non-financial assets and
liabilities that are recognized or disclosed on a non-recurring basis.

Effective February 1, 2008, the Company
adopted the provisions of Statement No. 157 for financial assets and
liabilities, as well as for any other assets and liabilities that are carried at
fair value on a recurring basis. The adoption of the provisions of Statement No.
157 related to financial assets and liabilities and other assets and liabilities
that are carried at fair value on a recurring basis did not materially impact
the Companys consolidated financial position and results of operations.

Statement No. 157 defines fair value as
the exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date. Statement No. 157 also establishes a fair value hierarchy,
which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. Statement No. 157
describes three levels of inputs that may be used to measure fair value:

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
liabilities measured at fair value on a recurring basis at July 31, 2008, as
required by Statement No. 157.

| |                        |   |               |  |   | Fair Value Measurements Using |  |   |               | 
| | ---------------------- | - | ------------- |  | - | ----------------------------- |  | - | ------------- | 
| |                        |   | Level
      1 |  |   | Level
      2                 |  |   | Level
      3 | 
| | Liabilities            |   |               |  |   |                               |  |   |               | 
| | Derivative liabilities | $ | --            |  | $ | --                            |  | $ | 4,628,207     | 

9

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|2. | ACCOUNTS RECEIVABLE AND NOTES
  RECEIVABLE
|-- | ------------------------------------------

July
      31, 2008Trade receivables from software &
      consulting
    
    
    
    $
    44,111Less: Allowance
      for doubtful accounts
    
    
    
    
    2,20641,905Notes receivable from vehicle sales Florida
    
    
    
    
    644,855Less: Allowance for doubtful accounts
    
    
    
    
    128,226516,629Notes receivable from vehicle sales
      Midwest
    
    
    
    
    18,948,588Less: Allowance
      for doubtful accounts
    
    
    
    
    3,759,93515,188,653Notes receivable from vehicle sales Texas Auto
    
    
    10,275,512Less: Allowance for doubtful accounts
    
    
    
    
    2,099,6318,175,881Long-term portion of notes receivable
    
    Florida
    
    
    180,820Midwest
    
    
    5,316,029Texas Auto
    
    
    2,861,558Total
    
    
    8,358,407Current portion of notes receivable
    
    Florida
    
    
    335,809Midwest
    
    
    9,872,624Texas Auto
    
    
    5,314,323Total
    
    $
    15,522,756


The future maturities of the long-term
portion of the notes receivable for the subsequent periods ending July 31, 2009
through 2012 are $8,375,176 in fiscal year 2010, $3,224,169 in fiscal year 2011,
and $1,062,865 in fiscal year 2012.

During the six month periods ended July
31, 2008, and 2007, the Company earned $3,309,130 and $35,541, respectively, of
financing income on the notes receivable. This amount has been included as
interest income within Revenues in these condensed consolidated financial
statements.

Activity in the allowance for doubtful
accounts for the six months ended July 31, 2008 is as follows:

|                             |   | Software |   |   | Florida |   |   | Midwest    |   |   | Texas     |   |   | Total
      2008 |   |   | 2007    |  
|---------------------------- | - | -------- | - | - | ------- | - | - | ---------- | - | - | --------- | - | - | ---------------- | - | - | ------- | -
|Balance at Beginning of Year | $ | 8,543    |   | $ | 117,161 |   | $ | 4,103,125  |   | $ | 3,526,902 |   |   | 7,755,731        |   | $ | 83,775  |  
|Charged to Expenses          |   | (3,612   | ) |   | 26,507  |   |   | 1,591,593  |   |   | 116,553   |   |   | 1,731,041        |   |   | 4,153   |  
|Write-offs and Other         |   | 486      |   |   | (23,813 | ) |   | (1,989,675 | ) |   | (876,669  | ) |   | (2,889,671       | ) |   | (28,505 | )
|Balance at April 30, 2008    |   | 5,417    |   |   | 119,855 |   |   | 3,705,043  |   |   | 2,766,786 |   |   | 6,597,101        |   |   | 59,423  |  
|Charged to Expenses          |   | 69,215   |   |   | 101,544 |   |   | 1,977,971  |   |   | 254,380   |   |   | 2,403,110        |   |   | 52,887  |  
|Write-offs and Other         |   | (72,426  | ) |   | (93,173 | ) |   | (1,923,079 | ) |   | (921,535  | ) |   | (3,010,213       | ) |   | (41,805 | )
|Balance at end of period     | $ | 2,206    |   | $ | 128,226 |   | $ | 3,759,935  |   | $ | 2,099,631 |   | $ | 5,989,998        |   | $ | 70,505  |  

10

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|3. | LONG-TERM DEBT
|-- | --------------

The future maturities of the line of
credit and floor plan are estimated as follows:

Years ending July 312009
    $
    20,314,5012010
    
    11,071,8142011
    
    4,268,4982012
    
    1,412,525Total long term debt
    $
    37,067,338


These estimated maturities are based
upon the Companys projected repayment schedules which are affected by the
expected collection periods of existing notes receivable rather than the
contracted latest repayment date stipulated in the agreement.

|4. | **CONVERTIBLE DEBENTURE**
|-- | -------------------------

As of July 31, 2008 the Company had outstanding
Convertible Debentures as follows:

a)
      $2,253,131 face value convertible debenture due February 28, 2009
    $
    1,288,065b) $953,488 face
      value convertible debenture due August 31, 2008
    
    105,265c)
      $1,500,000 face value convertible debenture due September 26, 2009
    
    290,075d) $800,000 face
      value convertible debenture due December 1, 2011
    
    49,2831,732,688Less current
      portion
    
    (1,572,981
    )Long-term portion
    $
    159,707


The unamortized discount of $3,773,931
will be amortized utilizing the effective interest method through the respective
maturity dates.

|5. | LIQUIDATED DAMAGES
|-- | ------------------

The Trafalgar financings include
registration rights agreements which, under certain circumstances, include
provisions that require the Company to pay liquidated damages, in the event
effective registrations are not in place on a timely basis for the underlying
shares in the Trafalgar transactions. The Company originally filed a
Registration Statement on Form SB-2 on April 17, 2007. Such registration was
updated and amended several times until it was finally approved and declared
effective on March 24, 2008 as an amended SB-2 on Form F-3. On November 21,
2007, the Company was invoiced by Trafalgar for a total of $165,184 of
liquidated damages. The Company was further invoiced an additional $54,192 on
February 13, 2008. Both amounts ($219,376) were recorded as interest expense
during the year ended January 31, 2008. Since the registration rights agreements
call for liquidated damages up to 15%, a remaining contingent liability of
$155,624 remains under the $2,500,000 Trafalgar financing. In addition, the
$1,000,000 September 10, 2007 and $1,500,000 September 26, 2007 Trafalgar
financings have similar registration rights provisions (limited to 15%) with
contingent amounts of $150,000 and $225,000. The Form F-3 filing declared
effective on March 24, 2008, included the maximum number for shares underlying
both the convertible debentures and warrants held by Trafalgar as allowed under
SEC Rule 415. No additional invoices for liquidated damages have been received
and the Company believes that no additional expense will be incurred as the
registration statement requirements for filing have been fulfilled.

11

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|6. | COMMON STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (a) Conversion of convertible
debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | During the six months ended July 31, 2008, the Company
      issued 597,868 shares of common stock at conversion prices ranging from
      $0.136 to $0.1488 in a series of Trafalgar Convertible Debenture
      conversions. As a result of these transactions, the unamortized discount
      and deferred financing costs of an aggregate of approximately $128,000
      were charged to Additional Paid-in Capital.                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (b) Unregisteredshares for investment
      banking services                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On April 7, 2008, the Company entered into a
      non-exclusive investment banking arrangement for a six month period. The
      Company paid an initial non-refundable $5,000 retainer and will pay an
      additional monthly retainer of $2,500 for 6 months which began on May 15,
      2008. In addition, the Company issued 250,000 unregistered common shares
      on May 15, 2008 which were valued at $0.15 per share and will be expensed
      over the six month term of the contract.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (c) Unregistered shares for executive officer
      compensation                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On February 1, 2008, the Company issued 150,000
      unregistered common shares for discretionary                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | management compensation. Compensation expense of $39,000,
      based on the market value of $0.26, was recorded during the six months
      ended July 31, 2008.                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (d) Issued and outstanding common
shares                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Issued and outstanding common shares as of January 31,
      2008 as previously reported (67,590,681 shares) has been corrected to
      properly exclude the grant of 2,720,000 share of unvested incentive stock.
      This correction has no effect on previously reported net income (loss) or
      net income (loss) per share as the Company properly excluded these shares
      and associated expense in the January 31, 2008 consolidated financial
      statements.                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|7. | DERIVATIVE LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Fair values of derivative liabilities at July 31, 2008
      were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                         

CompoundEmbedded
    
    
    Warrant
    
    
    TotalDerivatives
    
    
    Derivatives
    
    
    Derivatives$2,253,131 face value convertible debenture
      due February 28,2009
    $
    1,225,306
    
    $
    214,750
    
    $
    1,440,056$953,488 face value convertible debenture
      due August 31, 2008
    
    203,048
    
    
    136,600
    
    
    339,648$1,500,000 face value convertible debenture
      due September 26, 2009
    
    886,882
    
    
    153,950
    
    
    1,040,832$800,000 face value convertible debenture
      due December 1, 2010
    
    730,771
    
    
    -
    
    
    730,7712004 warrants expiring October 6, 2009
    
    
    
    
    359,123
    
    
    359,1232004 warrants expiring October 10, 2010
    
    
    
    
    646,444
    
    
    646,4442004 warrants expiring April 6, 2011
    
    
    
    
    18,378
    
    
    18,3782006 warrants expiring September 5, 2008
    
    
    
    
    1,720
    
    
    1,7202004 warrants expiring October 6, 2011
    
    
    
    
    51,235
    
    
    51,235$
    3,046,007
    
    $
    1,582,200
    
    $
    4,628,207


12

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|7. | DERIVATIVE LIABILITIES
  (continued)
|-- | ------------------------------------

This derivative liability is adjusted
quarterly based on a value model discussed in Note 1 herein and any changes in
fair value are recorded as gain (loss) on derivative liabilities in the
condensed consolidated statements of operations.

The following table summarizes the
number of common shares indexed to the derivative financial instruments as of
July 31, 2008:

| |                                                                                     |  | Warrant     |  |  | Conversion | 
| | ----------------------------------------------------------------------------------- |  | ----------- |  |  | ---------- | 
| |                                                                                     |  | Derivatives |  |  | Features   | 
| | $2,253,131 outstanding balance of
      convertible debenture due February 28, 2009 |  | 2,500,000   |  |  | 31,708,458 | 
| | $953,488 outstanding balance of convertible
      debenture due August 31, 2008     |  | 2,000,000   |  |  | 11,217,510 | 
| | $1,500,000 face value convertible debenture
      due September 26, 2009            |  | 2,000,000   |  |  | 17,647,059 | 
| | $800,000 face value convertible debenture
      due December 1, 2010                |  | n/a         |  |  | 9,411,765  | 
| | 2004 warrants expiring October 6, 2009                                              |  | 9,212,400   |  |  |            | 
| | 2004 warrants expiring October 10, 2010                                             |  | 11,055,264  |  |  |            | 
| | 2004 warrants expiring April 6, 2011                                                |  | 314,276     |  |  |            | 
| | 2006 warrants expiring September 5, 2008                                            |  | 3,965,464   |  |  |            | 
| | 2004 warrants expiring October 6, 2011                                              |  | 876,200     |  |  |            | 
| |                                                                                     |  | 31,923,604  |  |  | 69,984,792 | 

For information and significant
assumptions embodied in our valuations (including range for certain assumptions)
See Note 12 to the January 31, 2008 Form 10 KSB.

|8. | CASH FLOW INFORMATION
|-- | ---------------------

*(a) Supplemental Information*

Six months endedJuly
      31, 2008
    
    
    July
      31, 2007Cash paid during
      the period for Interest
    $
    2,381,468
    
    $
    113,915


*(b) Supplemental non-cash information*

During the six months ended July 31, 2007, the
Company issued $2,500,000 of Convertible Debentures in which $400,997 of
proceeds were allocated and capitalized as deferred financing costs. See Note
7(a) to January 31, 2008 Form 10-KSB. During this same period, the Company also
negotiated the settlement of a $466,337 trade payable which resulted in a gain
on debt forgiveness of $391,337.

During the six months ended July 31, 2008, the
Company issued 597,868 shares of common stock in connection with conversions of
$103,492 of face value of convertible debentures. See Note 6 herein.

|9. | SALE OF SOFTWARE
OPERATIONS
|-- | ---------------------------

On July 2, 2008, the Company sold
certain of its assets related to the software line of products to Constellation
Homebuilder Systems Inc., a Delaware corporation, and Constellation Homebuilder
Systems, Corp., a corporation incorporated under the laws of the Province of
Ontario (together, Constellation) for a selling price of $2,509,000 and the
assumption by Constellation of certain liabilities. A gain of $2,514,229 has
been recognized in the accompanying Condensed Consolidated Statement of
Operations.

13

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|9.  | SALE OF SOFTWARE OPERATIONS (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The assets sold to Constellation included $22,240 of net
      receivables and depreciated assets with a cost of $146,882 and a book
      value of $18,023. Constellation assumed $54,492 of liabilities consisting
      of prepaid software support and uninstalled software. All rights to the
      source code of all software products previously sold by the Company were
      conveyed to Constellation under the agreement, including the customer base
      and all ongoing revenue derived from the software as of July 1,
    2008.                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company retained all the consulting portion of its
      business and intends to continue to operate and expand that segment of its
      operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10. | SEGMENT INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company operates and manages its business in two
      segments, which are its used car sales and financing segment (Carbiz Auto
      Creditor CAC), including its new acquisitions Carbiz Auto Credit AQor
      AQ and Texas Auto Creditor Texas Auto, and its previous joint
      venture (JV1), and various consulting services offered to independent
      car dealerships (Consulting and Software).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In prior years, JV1 has been displayed as a separate
      segment of operations. The Company purchased the 50% percent portion of
      JV1 it did not own on January 24, 2008, and as a result, the Company now
      consolidates the JV1 results with the other CAC results. All of the
      Companys revenue is generated in the United States and all of the
      Companys assets are located in the U.S.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Consulting and Software consists of new sales and monthly
      revenues for software products through June 2008 and other related revenue
      from credit bureau fees, supply sales and forms programming, and new sales
      and recurring monthly revenues of consulting products. On July 2, 2008,
      the Company sold the assets and operations related to its dealer software
      (See Note 9). The results in the Consulting and Software segment for the
      three months and six months ended July 31 2008 include all revenue and
      expenses related to the software operations through June 30, 2008. The
      comparison to the same periods in the prior year will therefore include
      only two months and five months of software sales and expenses in the 2008
      period while the prior year periods include software revenue and expenses
      for three and six month results, respectively.

14

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|10. | SEGMENT INFORMATION
(continued)
|--- | -------------------------------

| |                                             |   | Carbiz Auto |   |   | Consulting and |   |   |            |  
| | ------------------------------------------- | - | ----------- | - | - | -------------- | - | - | ---------- | -
| |                                             |   | Credit      |   |   | Software       |   |   | Total      |  
| | Three months ended July 31                  |   |             |   |   | 2008           |   |   |            |  
| | Sales                                       | $ | 8,371,006   |   | $ | 412,942        |   | $ | 8,783,948  |  
| | Cost of Sales                               |   | 5,100,731   |   |   | 274,951        |   |   | 5,375,682  |  
| | Gross Profit                                |   | 3,270,275   |   |   | 137,991        |   |   | 3,408,266  |  
| | Operating Expenses
      (1)                |   | 3,563,743   |   |   | 928,510        |   |   | 4,492,253  |  
| | Income (Loss) From Segments                 |   | (293,468    | ) |   | (790,519       | ) |   | (1,083,987 | )
| | Depreciation & Amortization                 |   |             |   |   |                |   |   | (32,766    | )
| | Total Operating Loss                        |   |             |   |   |                |   |   | (1,116,753 | )
| | Total Assets                                | $ | 26,674,462  |   | $ | 4,656,518      |   | $ | 31,330,980 |  
| | Three months ended July 31                  |   |             |   |   | 2007           |   |   |            |  
| | Sales                                       | $ | 361,717     |   | $ | 581,674        |   | $ | 943,391    |  
| | Cost of Sales                               |   | 275,189     |   |   | 243,652        |   |   | 518,841    |  
| | Gross Profit                                |   | 86,528      |   |   | 338,022        |   |   | 424,550    |  
| | Operating Expenses (1)                      |   | 137,675     |   |   | 1,414,216      |   |   | 1,551,891  |  
| | Income (Loss) From
      Segments           |   | (51,147     | ) |   | (1,076,194     | ) |   | (1,127,341 | )
| | Depreciation & Amortization                 |   |             |   |   |                |   |   | (12,092    | )
| | Total Operating Loss                        |   |             |   |   |                |   |   | (1,139,433 | )
| | Total Assets                                | $ | (157,315    | ) | $ | 1,993,000      |   | $ | 1,835,685  |  
| | Six months ended July 31                    |   |             |   |   | 2008           |   |   |            |  
| | Sales                                       | $ | 16,718,961  |   | $ | 988,259        |   | $ | 17,707,220 |  
| | Cost of Sales                               |   | 9,520,092   |   |   | 655,283        |   |   | 10,175,375 |  
| | Gross Profit                                |   | 7,198,869   |   |   | 332,976        |   |   | 7,531,845  |  
| | Operating Expenses
      (1)                |   | 6,783,383   |   |   | 1,888,164      |   |   | 8,671,547  |  
| | Income (Loss) From Segments                 |   | 415,486     |   |   | (1,555,188     | ) |   | (1,139,702 | )
| | Depreciation & Amortization                 |   |             |   |   |                |   |   | (79,678    | )
| | Total Operating Loss                        |   |             |   |   |                |   |   | (1,219,380 | )
| | Total Assets                                | $ | 26,674,462  |   | $ | 4,656,518      |   | $ | 31,330,980 |  
| | Six months ended July 31                    |   |             |   |   | 2007           |   |   |            |  
| | Sales                                       | $ | 632,323     |   | $ | 1,191,653      |   | $ | 1,823,976  |  
| | Cost of Sales                               |   | 472,991     |   |   | 461,803        |   |   | 934,794    |  
| | Gross Profit                                |   | 159,332     |   |   | 729,850        |   |   | 889,182    |  
| | Operating Expenses (1)                      |   | 205,847     |   |   | 1,998,310      |   |   | 2,204,157  |  
| | Income (Loss) From
      Segments           |   | (46,515     | ) |   | (1,268,460     | ) |   | (1,314,975 | )
| | Depreciation & Amortization                 |   |             |   |   |                |   |   | (38,641    | )
| | Gain on Debt Forgiveness                    |   |             |   |   |                |   |   | 391,337    |  
| | Total Operating Loss                        |   |             |   |   |                |   | $ | (962,279   | )
| | Total Assets                                | $ | (157,315    | ) | $ | 1,993,000      |   | $ | 1,835,685  |  
| | (1) Excluding depreciation and amortization |   |             |   |   |                |   |   |            |  

15

---

|CARBIZ INC.                                                   
|--------------------------------------------------------------
|Notes to the Condensed Consolidated Financial
      Statements
|July 31, 2008 and 2007                                        
|(unaudited)                                                   

|11. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | On August 16, 2008, the Company completed a supplemental
      acquisition in Houston of a small portfolio of used automobile and light
      truck loans with an outstanding balance due of approximately $568,400 from
      AGM, LLC. The Company had previously been servicing the portfolio for the
      lender. The consideration of $400,000 was funded by an additional line of
      credit provided to the Company by SWC Services LLC (SWC), the Companys
      senior lender.                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | On September 4, 2008, 1,189,882 common share warrants
      issued as part of the previously reported September 5, 2006 sale of
      unregistered securities were exercised at the exercise price of $0.15 per
      share. The balance of the common share warrants (2,775,582) expired
      unexercised on September 5, 2008.                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | On September 11, 2008, $447,000 of the $800,000 Face
      Value Convertible Debenture due December 1, 2010 plus $48,404 of accrued
      interest was converted to 5,828,285 common shares at a conversion price of
      $0.085 per share.                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|12. | COMMITMENTS AND CONTINGENCIES.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | See Note 5 for Registration Rights liquidated
    damages.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | As outlined in Note 6 (b), the Company entered into a
      non-exclusive investment banking arrangement for a six month period. In
      addition to the specific fees outlined in Note 6(b), the agreement also
      provides for contingent fees typical in the investment banking industry
      for any equity raised as a direct result of the services of the service
      provider. The contingent fees include warrants to purchase common shares
      of the Company and cash compensation equal to a percentage of the gross
      proceeds.

16

---

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 July 31, 2008 and the audited consolidated January 31, 2008
statements reported in our January 31, 2008 Form 10-KSB.

Overview

Our revenue has been derived from two
sources, which include:

|• | Direct auto sales and related financing
        (Carbiz Auto Credit centers)through our self provided on-site specialty
        finance business at 26 company owned locations; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|• | Software product and support sales
        and business model consulting servicesthrough initial software license
        fees and subsequent support agreements, which provide monthly maintenance
        fees as well as through a combination of one-time consulting fees and
        monthly business analysis services. The software division was sold on
        July 2, 2008 and as of July 1, 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.

Historically, we have been a
software company that has also offered business model consulting services to,
the North American automobile industry. In May 2004, we decided to enter 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 nine 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, we purchased an additional portfolio
of consumer loans and opened our first Supercenterin Houston, Texas. In July
2008 we sold our software operations and retained our business model consulting
services.

We currently operate a chain of
26 used car stores that sell used cars and trucks and originate loans for
consumers with poor credit. We hold the consumer notes generated by the loans as
assets and pledge them as collateral to secure our obligations under our senior
debt facility.

In terms of our existing
consulting business, our substantial customer base of consulting clients
continues to grow organically and provides both a stable revenue base of monthly
support and continuing opportunities for providing additional consulting
services to those dealers. During the six months ended July 31, 2008, we
introduced several new consulting products including seminar and training
products that are approved by and marketed in conjunction with state dealer
associations and other dealer groups, and Performance Groups, a new form of
dealer 20 Group (moderated groups of similar but geographically separated
dealers who exchange financial and operational information) structured
specifically for the Buy Here-Pay Here dealer market. Initial acceptance of the
Performance Group product has been outstanding, with over 60 dealer locations
enrolled in groups, with over $60,000,000 total loan portfolio balances.

Critical Accounting Policies

Revenue Recognition

Our revenue is derived from the
sale and financing of used vehicles to consumers and the sale of consulting
services to dealers in the automobile industry. The sale of vehicles is
recognized once the customer takes delivery and title has passed to the
customer. In the case of financing of sold vehicles, the interest is recognized
over the term of the loan, which range from 80 weeks to 48 months, based on the
principal outstanding at the time. Interest

17

---

accrued is suspended on non-performing loans after the loan
reaches  pending charge off, which is generally done when the loan is
delinquent for 60 days.

For all non-software or
non-software related revenue, we recognize revenue in accordance with Securities
and Exchange Commission Staff Accounting Bulletin 104, Revenue Recognition,
which was preceded by Staff Accounting Bulletin 101, Revenue Recognition in
Financial Statements. Consulting services revenue is recognized when a signed
contract has been executed, the services have been delivered, and obligations
have been fulfilled.

Prior to the sale of our software
operations, we recognized revenue in accordance with Statement of Position 97-2,
Software Revenue Recognition,issued by the American Institute of Certified
Public Accountants in October 1997 as amended by Statement of Position 98-9
issued in December 1998 for all software or software related revenue. Our
revenue from licenses is recognized upon the execution of a license agreement,
when the licensed product has been delivered, fees are fixed or determinable,
collection is probable and when all significant obligations have been fulfilled.

Use of Estimates

In preparing our financial
statements in accordance with generally accepted accounting principles, our
management is required to make estimates and assumptions that affect the
reported amount of assets, liabilities, and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Estimates are used when accounting for items and matters such as the
allowance for doubtful accounts, deferred revenue, derivative financial
instruments and other share based payments.

Share-Based Compensation

All share-based payments (stock
options and stock grants) are recognized based upon their fair value at the date
of grant in accordance with Financial Accounting Standard 123R Share Based
Payments

Derivative Liabilities

We account for warrants and other
embedded features issued in connection with financing arrangements in accordance
with Emerging Issues Task Force (EITF) Issue No. 00-19, Accounting for
Derivative Financial Instruments, Indexed to, and Potentially Settled in, a
Companys Own Stock(EITF 00-19). Pursuant to EITF 00-19, an evaluation of
specifically identified conditions is made to determine whether the fair value
of warrants and embedded features is required to be classified as a derivative
liability. The fair value of such instruments classified as derivative
liabilities is adjusted for changes in fair value at each reporting period, and
the corresponding non-cash gain or loss is recorded in current period earnings.

Allowance for credit losses

The Company maintains an
allowance for credit losses on an aggregate basis at a level it considers
sufficient to cover estimated losses in the collection of its finance
receivables. The allowance for credit losses is based primarily upon historical
credit loss experience, with consideration given to recent credit loss trends
and changes in loan characteristics (i.e., average amount financed and term),
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 foreseeable which could cause actual credit losses
to be materially different from the recorded allowance for credit losses, the
Company believes that it has given appropriate consideration to all relevant
factors and has made reasonable assumptions in determining the allowance for
credit losses.

18

---

Three Month Financial Information

The following summary of selected
financial information for the three months ended July 31, 2008 and 2007 is
derived from, and should be read in conjunction with, and is qualified in its
entirety by reference to, our interim financial statements, including the notes
thereto, for periods ended July 31, 2008 and 2007.

Three months ended July 31, 2008 compared to the three
months ended July 31, 2007

|                                      |   |            |   |  | % of    |   |  |            |   |  | % of    |  
|------------------------------------- | - | ---------- | - |  | ------- | - |  | ---------- | - |  | ------- | -
|                                      |   | July 2008  |   |  | Revenue |   |  | July 2007  |   |  | Revenue |  
|Revenue                               | $ | 8,783,948  |   |  | 100.0   |   |  | 943,391    |   |  | 100.0   |  
|Cost of sales                         | $ | 5,375,682  |   |  | 61.2    |   |  | 518,841    |   |  | 55.0    |  
|Gross profit                          | $ | 3,408,266  |   |  | 38.8    |   |  | 424,550    |   |  | 45.0    |  
|Gain on debt forgiveness              | $ | -          |   |  | -       |   |  | -          |   |  | -       |  
|Operating expenses                    | $ | 4,525,019  |   |  | 51.5    |   |  | 1,563,983  |   |  | 165.8   |  
|Operating income (loss)               | $ | (1,116,753 | ) |  | (12.7   | ) |  | (1,139,433 | ) |  | (120.8  | )
|Interest expense                      | $ | (1,877,114 | ) |  | 21.4    |   |  | (149,430   | ) |  | 15.8    |  
|Gain (loss) on derivative instruments | $ | 2,010,476  |   |  | 22.9    |   |  | (1,430,363 | ) |  | (151.6  | )
|Gain on sale of software division     | $ | 2,514,229  |   |  | 28.6    |   |  | -          |   |  | -       |  
|Minority interest income (loss)       | $ | -          |   |  | -       |   |  | 7,128      |   |  | 0.8     |  
|NET INCOME (LOSS)                     | $ | 1,530,838  |   |  | 17.4    |   |  | (2,712,098 | ) |  | (287.5  | )
|Income (loss) per common share        | $ | 0.02       |   |  |         |   |  | (0.04      | ) |  |         |  

Revenue

In the three months ended July
31, 2008, our revenues increased by $7,840,557 compared to the same period ended
July 31, 2007. This was primarily due to our acquisition of a number of
buy-here-pay-here credit centers. Our Carbiz Auto Credit locations that were in
operation during the second quarter of 2007 had total sales during the three
months-ended July 31, 2008 of $6,909,797 compared to the previous periods sales
of $341,760. Our new Midwest locations acquired October 1, 2007 provided
$6,821,400 of sales and our Houston location provided $1,288,244 of sales. Our
software and consulting products had sales of $412,942 during the three months
ended July 31, 2008 as compared to $581,574 during the same period ended July
31, 2007 as a result of the software operations sale on July 2, 2008.

In the three months ended July
31, 2008, we sold 946 cars compared to 1,036 cars during the three months ended
April 30, 2008, a decrease of 10% from the previous three months. Total revenue
from car sales during the three months ended July 31, 2008 was $6,909,797
compared to $6,500,034 during the three months ended April 30, 2008, an increase
of 6%. This was a result of an increase in the average selling price per car,
which was $6,910 and $5,739 during the three months ended July 31, 2008 and
April 30, 2008, respectively, an increase of $1,171 per car.

Interest income for the three
months ended July 31, 2008 increased by $1,441,252 compared to the previous
years three month period, primarily due to the acquisitions of
buy-here-pay-here credit centers and the related portfolios. Interest income
from our three original Carbiz Auto Credit locations during the three months
ended July 31, 2008 was $22,184. Our Midwest locations acquired October 1, 2007
provided $915,692 of interest income and our Houston location provided $523,333
of interest income.

Cost of Sales

Our cost of sales expense
increased by $4,856,841 for the three months ended July 31, 2008, compared to
the previous years three month period. Carbiz Auto Credit operations cost of
sales increased by $4,825,542, due to our Midwest and Houston locations. We
anticipate that our cost of sales expense will continue to increase as we
experience full fiscal year operations from the newly acquired credit centers.
Our software and consulting products cost of sales expense increased $31,299
during the three months ended July 31, 2008 despite the sale of the software
operations sold on July 2, 2008, primarily due to increased personnel expense
and transaction based costs for products introduced during the current fiscal
year.

Expenses

For the three months ended July
31, 2008, our personnel expenses increased by $365,599 compared to the previous
years three month period. This was due to the additional corporate staff to
support the acquired Midwest

19

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and Texas locations. Selling expenses increased for the three
months ended July 31, 2008 by $86,053 due to additional advertising to support
the Midwest and Texas locations. Professional fees decreased by $89,808 as a
result of higher than normal professional fees in the prior year period due to
the fees incurred in various lender agreements during that period. Other
operating expenses increased by $214,321 during the three month period ended
July 31, 2008, due to the general office, rent expense and other expenses
incurred by the acquired Midwest and Texas locations.

The additional Midwest and Texas
locations have required a moderate investment in fixed assets and as a result,
depreciation expense increased for the period from $12,092 to $32,766 or
$20,674.

Bad Debt Expense

For the three months ended July
31, 2008 the total amount of loans charged off to bad debt was $3,010,213
compared to $2,889,671 for the three months ended April 30, 2008, which
primarily related to our CarBiz Auto Credit loan portfolio. Additional
non-performing portions of the portfolios acquired in the Midwest and Texas in
2007 were charged off during the period, and while we expect that the remaining
acquired loans may not perform to the level of new loans written with our
underwriting standards.

At July 31, 2008 approximately
one half of our total Midwest portfolio consists of loans that have been
originated since the acquisition. During for the three months ended July 31,
2008, $1,393,592 of the acquired portfolio was charged off compared to
$1,736,893 for the three months ended April 30, 2008 and $605,103 of the
portfolio originated by us was charged off compared to $276,595 during the three
months ended April 30, 2008. The Texas portfolio at July 31, 2008 is
approximately 95% acquired loans since new loans are originated only from one
location. During the three months ended July 31, 2008, $913,070 of the acquired
loans was charged off compared to $876,669 during the three months ended April
30, 2008.

Interest Expense

Our interest expense and other
expenses increased by $1,727,684 for the three months ended July 31, 2008,
compared to the previous years three month period, as a result of the issuance
of the four convertible debentures during the prior fiscal year and the various
credit facilities to support our Midwest and Texas operations. The convertible
debenture financings incurred interest expense. 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. We anticipate our
interest expense will increase over this and subsequent years while the
convertible debentures remain outstanding and as we draw down on our lending
facilities to finance additional inventory and customer loans.

Gain/Loss on Derivative Instruments

For the three months ended July
31, 2008, we incurred a non-cash gain of $2,010,476 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 July 31, 2007
we incurred a non-cash loss of $1,430,363 including day one derivative losses on
new financings. We expect gains and losses on derivative instruments in the
future while the convertible debentures and related warrants remain
outstanding.

Gain on Sale of Software Division

For the three months ended July
31, 2008 we recorded a gain of $2,514,229 on the sale of our software line of
products on July 2, 2008. The purchase price was $2,509,000 and the assumption
of certain liabilities by the purchaser. All rights to the source code of all
software products previously sold by the Company were conveyed to the purchaser
under the agreement, including the customer base and all ongoing revenue derived
from the software as of July 1, 2008. The Company retained all of the consulting
portion of its business and intends to continue to operate and expand that
segment of its operations.

Software Sales, Support and Consulting

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 1, 2008, our ongoing revenue stream will consist of
new sales and monthly

20

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revenue from consulting products, training products, Buy
Here-Pay Here performance groups, seminars, other one time dealer assistance,
and supply sales.

Total software and consulting
sales during the three months ended July 31, 2008 decreased from the prior
years three month period by $168,732. The three month period this year included
only two months of software revenue as compared to three months revenue in the
same period last year.

Bad Debt Provision

As of July 31, 2008, the total
Carbiz Auto Credit loan portfolio was $29,868,954. The allowance for doubtful
accounts at the same date was $5,989,998.

After the acquisition of the
Midwest and Houston portfolios, we determined that since our historical
portfolio of approximately $600,000 in our Florida stores is now a very small
percentage of the total portfolio, it is appropriate to apply a percentage to
the entire portfolio rather than use a different method on that portion of the
portfolio.

It is not reasonable to expect
that the acquired portfolio will perform as well as if we had originated every
loan. Therefore, we have determined that a percentage above our own historical
level, but better than the industry average, is appropriate for the reserve
calculation going forward. In addition, because of the large number of accounts
and physical locations, we also determined that identifying all pending
repossessions at the reporting date was unrealistic. Those factors led to the
application of a 20% reserve calculation on the total balance of the Florida and
Midwest originated and the Midwest acquired portfolio. A factor of 21% was
applied to calculate the reserve for the Houston portfolio. These percentages
are in line with industry averages, but will be re-evaluated with more
experience in collection results.

All acquired loans were made at a
maximum interest rate of 29.9% APR. Newly originated loans are made at a maximum
interest rate of 19.95% with no loans made without complete documentation and
verification of employment and references. While our underwriting procedures do
not take credit score into account, a credit bureau report is obtained for each
customer. While the range of scores varies widely, the average credit score of
our customers is approximately 500. Typically, loans are made for approximately
100% of the sale price of the car, with down payment amounts sufficient to
offset the costs incurred for license and title fees and sales taxes paid.

Six Month Financial Information

The following summary of selected
financial information for the six months ended July 31, 2008 and 2007 is derived
from, and should be read in conjunction with, and is qualified in its entirety
by reference to, our interim financial statements, including the notes thereto,
for periods ended July 31, 2008 and 2007.

**Six months ended July 31, 2008 compared to the six
months ended July 31, 2007**

|                                      |   |            |   |  | % of    |   |   |            |   |  | % of        |  
|------------------------------------- | - | ---------- | - |  | ------- | - | - | ---------- | - |  | ----------- | -
|                                      |   | July 2008  |   |  | Revenue |   |   | July 2007  |   |  | **Revenue** |  
|Revenue                               | $ | 17,707,220 |   |  | 100.0   |   | $ | 1,823,976  |   |  | 100.0       |  
|Cost of sales                         | $ | 10,175,375 |   |  | 57.5    |   | $ | 934,794    |   |  | 51.2        |  
|Gross profit                          | $ | 7,531,845  |   |  | 42.5    |   | $ | 889,182    |   |  | 48.8        |  
|Gain on debt forgiveness              | $ | 0          |   |  | 0       |   | $ | 391,337    |   |  | 21.5        |  
|Operating expenses                    | $ | 8,715,225  |   |  | 49.3    |   | $ | 2,242,798  |   |  | 123.0       |  
|Operating income (loss)               | $ | (1,219,380 | ) |  | (6.9    | ) | $ | (962,279   | ) |  | (52.8       | )
|Interest expense                      | $ | (3,783,535 | ) |  | 21.4    |   | $ | (238,937   | ) |  | 13.1        |  
|Gain (loss) on derivative instruments | $ | 4,044,824  |   |  | 22.8    |   | $ | (751,742   | ) |  | (41.2       | )
|Gain on sale of software division     | $ | 2,514,229  |   |  | 14.2    |   | $ | 0          |   |  | 0           |  
|Minority interest income (loss)       | $ | 0          |   |  | 0.0     |   | $ | 1,034      |   |  | 0.1         |  
|NET INCOME (LOSS)                     | $ | 1,556,148  |   |  | 8.7     |   | $ | (1,951,924 | ) |  | (107.0      | )
|Income (loss) per common share        | $ | 0.02       |   |  |         |   | $ | (0.03      | ) |  |             |  

Revenue

In the six months ended July 31,
2008, our revenues increased by $15,883,244 compared to our six-month period
ended July 31, 2007. This increase was due to our acquisition of a number of
buy-here-pay-here credit centers. Our Carbiz Auto Credit locations that were in
operating during the six months ended July 31, 2007 had total sales during

21

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the six months ended July 31, 2008 of $503,500 compared to the
previous periods sales of $596,782. Our new Midwest locations acquired October
1, 2007 provided $11,815,964 of sales and our Houston location provided
$1,090,367. Our software and consulting products had sales of $988,259 for the
six months ended July 31, 2008 compared to $1,191,653 for the same period ended
July 31, 2007 as a result of the sale of the software operations on July 2,
2008.

Interest income for the six
months ended July 31, 2008 increased by $3,273,589 compared to the previous
years six month period, primarily due to the acquisitions of buy-here-pay-here
credit centers and the related portfolios. Interest income from our three
original Carbiz Auto Credit locations during the six months ended July 31, 2008
was $53,451 compared to the previous years six month period of $35,541. Our
Midwest locations acquired October 1, 2007 provided $1,933,911 of interest
income and our Houston location provided $1,321,768 of interest income.

Cost of Sales

Our cost of sales expense
increased by $9,240,581 for the six months ended July 31, 2008, compared to the
same period ended July 31, 2007. Carbiz Auto Credit operations cost of sales
increased by $9,047,101 due to the addition of our Midwest and Houston
locations. We anticipate that our cost of sales expense will continue to
increase as we experience full fiscal year operations from the newly acquired
credit centers. Our software and consulting products cost of sales expense
increased $193,480 during the six months ended July 31, 2008 despite the sale of
the software operations on July 2, 2008.

Expenses

For the six months ended July 31,
2008, our personnel expenses increased by $763,006 compared to the previous
years six month period. This was due to the additional corporate staff to
support newly acquired Midwest and Texas locations. Selling expenses increased
for the six months ended July 31, 2008 by $207,010 due to additional advertising
to support the Midwest and Texas locations. Professional fees increased by
$135,255 due to increased audit and legal costs related to the increase in
company size, maintenance of lines of credit and floor plans, and registration
of shares in support of various debenture financings. Other operating expenses
increased by $1,262,892 during the six month period ended July 31, 2008, due to
the general office, rent expense and other expenses incurred by the acquired
Midwest and Texas locations.

Bad Debt Expense

For the six months ended July 31,
2008 the total amount of loans charged off to bad debt was $5,899,884, which
primarily relates to our CarBiz Auto Credit loan portfolio. Non-performing
portions of the portfolios acquired in the Midwest and Texas in 2007 were
charged off during the period, and while we expect that the remaining acquired
loans may not perform to the level of new loans written with our underwriting
standards. At July 31, 2008 approximately one half of our total Midwest
portfolio consists of loans that have been originated since the acquisition.
During that period, $3,130,485 of the acquired portfolio was charged off and
$881,698 of the portfolio originated by us was charged off. The Texas portfolio
at July 31, 2008 is approximately 95% acquired loans since new loans are
originated only from one location. During the period $1,789,739 of the acquired
loans was charged off and $8,465 of the portfolio originated by us was charged
off.

The total amounts charged off
during period resulted in total bad debt expense of $4,134,151 and an ending
balance in our bad debt reserve of $5,989,998 (See Note 3).

Interest Expense

Our interest expense increased by
$3,544,598 for the six months ended July 31, 2008, compared to the same period
ended July 31, 2007, as a result of the convertible debentures and the line of
credit. We anticipate our interest expense will increase over this and
subsequent years related to the Trafalgar Debentures and as we draw down on our
credit facility with SWC.

Gain/Loss on Derivative Instruments

For the six months ended July 31,
2008, we incurred a non-cash gain of $4,044,834 as a result of the fair value
adjustment of outstanding derivative instruments which are based primarily on
the fluctuations in our stock price. For the same period ended July 31, 2007, we
incurred a non-cash loss of $(751,742) including day one derivative

22

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losses on new financings. We expect gains and losses on
derivative instruments in the future while the convertible debentures and
related warrants remain outstanding.

Software Sales, Support and Consulting

Through June 30, 2008, this
segment of our business consisted of new sales and recurring 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 1, 2008 our ongoing revenue stream will
consist of new sales and monthly revenue from consulting products, training
products, BHPH performance groups, seminars, other one time dealer assistance,
and supply sales.

Total software and consulting
sales during the six months ended July 31, 2008 decreased from the prior years
six month period by $203,394. The six month period this year included only five
months of software revenue as compared to the six months revenue in the same
period last year.

Our consulting services help to
interpret dealer performance data and provide advice, as well as industry
benchmarks, to help dealers improve results. Our consulting focuses on
implementing a data tracking product that automates some data analysis, creates
a recurring revenue stream and facilitates additional consulting services.

Bad Debt Provision

As of July 31, 2008, the total
Carbiz Auto Credit loan portfolio was $29,868,954. The allowance for doubtful
accounts at the same date was $5,989,998.

After the acquisition of the
Midwest and Houston portfolios, we determined that since our historical
portfolio of approximately $600,000 in our Florida stores is now a very small
percentage of the total portfolio, it is appropriate to apply a percentage to
the entire portfolio rather than use a different method on that portion of the
portfolio.

It is not reasonable to expect
that the acquired portfolio will perform as well as if we had originated every
loan. Therefore, we have determined that a percentage above our own historical
level, but better than the industry average, is appropriate for the reserve
calculation going forward. In addition, because of the large number of accounts
and physical locations, we also determined that identifying all pending
repossessions at the reporting date was unrealistic. Those factors led to the
application of a 19% reserve calculation on the total balance of the Florida and
Midwest originated and the Midwest acquired portfolio. A factor of 21% was
applied to calculate the reserve for the Houston portfolio. These percentages
are in line with industry averages, but will be re-evaluated with more
experience in collection results.

All acquired loans were made at a
maximum interest rate of 29.9% APR. Newly originated loans are made at a maximum
interest rate of 19.95% with no loans made without complete documentation and
verification of employment and references. While our underwriting procedures do
not take credit score into account, a credit bureau report is obtained for each
customer. While the range of scores varies widely, the average credit score of
our customers is approximately 500. Typically, loans are made for approximately
100% of the sale price of the car, with down payment amounts sufficient to
offset the costs incurred for license and title fees and sales taxes paid.

Our depreciation and amortization
expense for the six months ended July 31, 2008 was $79,678 as compared to
$38,641 for the six month period ended July 31, 2007. This increase is a result
of capital additions related to our newly acquired Midwest and Houston locations
and the April, 2008 relocation of our corporate offices in Florida.

Liquidity and Capital Resources

As of January 31, 2008 and July
31, 2008, we had $1,141,271 and $374,894, respectively, in cash and cash
equivalents. During the six month period ended July 31, 2008, we increased our
accounts payable and accrued liabilities by $264,462, which totaled $3,343,022
at July 31, 2008. During the six months ended July 31, 2008, we made capital
lease payments totaling $4,108.

During the six months ended July
31, 2008, we issued approximately 597,868 shares at conversion prices ranging
from $0.1105 to $0.1488 in a series of convertible debenture conversions. We
continue to discuss various options available to the convertible debt holder and
the Company for debt service and conversions.

23

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The Senior Loan Facility
(Amended Credit Agreement) is divided into two parts, one to finance the
Companys Texas business (the Texas facilities), and one to finance the
Companys remaining business (the Non-Texas facilities).

The Non-Texas facilities have a
maximum commitment of $30 million, including a $23 million revolving receivable
loan facility, a $2 million revolving floor plan loan facility, and a term loan
in the amount of $21.925 million. The revolving receivable loan facility and
revolving floor plan loan facility will expire on October 1, 2011, and the term
loan has a maturity date of April 1, 2011.

The Texas facilities have a
maximum commitment of $34.975 million initially, including a $15 million
revolving receivable loan facility, a $2 million revolving floor plan loan
facility, and a term loan in the amount of $17.975 million

At July 31, 2008, we had total
outstanding borrowings under the Amended Credit Agreement of $37,067,338. The
amount of borrowings under the Amended Credit Agreement may fluctuate
materially, depending on various factors, including the size of our Eligible
Receivables, the time of year, our need to acquire inventory, changes to our
plans and initiatives, changes to our capital expenditure plans and the
occurrence of other events or transactions that may require funding through the
Amended Credit Agreement. When the software division was sold on July 2, 2008,
we used a $2,000,000 of the proceeds to reduce the term loan and revolving loan
facility. A payment of $154,211 was made to Trafalgar and applied to the
outstanding balance.

As of July 31, 2008, payments due
by us over the next five fiscal years for operating and capital leases, and
long-term debt are as follows:

| |                        |   | Less Than      |  |   | One to Three |  |   | Three to         |  |   | Greater than     |  |   |            | 
| | ---------------------- | - | -------------- |  | - | ------------ |  | - | ---------------- |  | - | ---------------- |  | - | ---------- | 
| |                        |   | One
      Year |  |   | Years        |  |   | Five
      Years |  |   | Five
      Years |  |   | Total      | 
| | Operating Leases       | $ | 1,280,565      |  | $ | 1,079,210    |  | $ | 231,184          |  | $ | 533,750          |  | $ | 3,124,709  | 
| | Capital Leases         |   | 4,232          |  |   | 2,696        |  |   | -                |  |   | -                |  |   | 6,928      | 
| | Long-Term Debt         |   | 26,012,879     |  |   | 10,738,617   |  |   | 315,842          |  |   | -                |  |   | 37,067,338 | 
| | Convertible Debentures |   | 4,135,613      |  |   | 1,371,006    |  |   | -                |  |   | -                |  |   | 5,506,619  | 
| | Interest               |   | 261,907        |  |   | 191,432      |  |   | -                |  |   | -                |  |   | 453,339    | 
| |                        | $ | 31,695,196     |  | $ | 13,382,961   |  | $ | 547,026          |  | $ | 533,750          |  | $ | 46,158,933 | 

Based on twelve month results
ended July 31, 2008 and an assumption of meeting business projections for the
remainder of the fiscal year, our current cash flow from operations and our cash
on hand are expected to be sufficient to fund our operations until July 2009.
Actual results that vary from projections may require the need for additional
cash during that period. 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. 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. If additional financing is raised by
the issuance of securities, control of Carbiz may change and/or our shareholders
may suffer significant dilution.

The Amended Credit Agreement
contains financial covenants which require, among other things, that we maintain
specified interest coverage and loss to liquidation ratios, and meet certain
specified minimum net income, loan loss and collection requirements. We and the
lender have agreed to continue to negotiate regarding certain additional
financial covenants relating to maintenance of specific leverage ratios and
minimum tangible net worth requirements. It is anticipated the agreement on the
covenants will be reached within a reasonable time. However, these discussions
have been ongoing since December 2007. If an agreement on such additional
covenants is not reached within a reasonable time, it may constitute a default
under the Amended Credit Agreement, which could result in the lender demanding
the repayment of approximately $37,067,338 currently due under the Amended
Credit Facility.

Off-Balance Sheet Arrangements

As of July 31, 2008, we do not have any off-balance sheet
arrangements.

24

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Item 4. 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 procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of the end 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.

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 generally accepted accounting principles. No changes in our internal
control over financial reporting occurred in our existing operations during our
most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

Notwithstanding the foregoing,
because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that our disclosure controls and
procedures will detect or uncover every situation involving the failure of
persons within our company and our subsidiaries to disclose material information
otherwise required to be set forth in our periodic reports. Our disclosure
controls and procedures are designed to provide reasonable assurance of
achieving their objective of ensuring that information required to be disclosed
in the reports that we file or submit under the Exchange Act is communicated to
management, including the Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

None.

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

Trafalgar conversions

During the three months ended July 31, 2008, the Company issued
100,000 shares at a conversion price of $0.136 in a Trafalgar Convertible
Debenture conversion.

Unregistered shares for investment banking
services

During the three months ended July 31, 2008, the Company issued
250,000 unregistered common shares which were valued at $0.15 per share under an
investment banking contract.

Item 3. Defaults Upon Senior Securities

None.

25

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

Our Annual Meeting of Shareholders was held at the Ritz-Carlton
at 1111 Ritz-Carlton Dr., Sarasota, Florida on June 19, 2008 at 4:00 p.m. Our
shareholders voted on two items, with results as indicated:

|(1) | The election of ten directors to serve until the next
      annual meeting of shareholders:
|--- | -------------------------------------------------------------------------------------------

Director
    No. of Shares
    No. of Shares
    No. of SharesVoted For
    Voted Against
    WithheldCarl Ritter
    19,950,728
    -
    1,500Ross Quigley
    19,950,728
    -
    1,500Richard Lye
    19,950,728
    -
    1,500Theodore Popel
    19,950,728
    -
    1,500Stanton Heintz
    19,950,728
    -
    1,500Christopher Bradbury
    19,950,728
    -
    1,500Wallace Weylie
    19,950,728
    -
    1,500Vernon Haverstock
    19,950,728
    -
    1,500Gene Tomsic
    19,950,728
    -
    1,500Brandon Quigley
    19,950,728
    -
    1,500


|(2) | The appointment of Cherry, Bekaert & Holland, L.L.P.,
      Certified Public Accountants as Auditor of the Corporation until the next
      annual General Meeting.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

No. of Shares
    No. of Shares
    
    No. ofVoted For
    Voted Against
    No. of Abstentions
    Broker Non-Votes19,952,228
    -
    -
    -


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  | Description                                                                      
| | 31.1    | 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 1350
| | 32.2    | Certification of Chief Financial Officer
      pursuant to 18 U.S.C. Section 1350

26

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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: September 12, 2008 | */s/ Carl Ritter*            
|                         | Carl Ritter                  
|                         | Chief Executive Officer      
|                         | (principal executive officer)

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