---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended **July 31, 2007**

OR

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

For the transition period from _______________ to
_______________

Commission file Number:**000-52209**

CARBIZ INC.(Exact name of
small business issuer as specified in its charter)

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

7405 North Tamiami Trail Sarasota, Florida 34243(Address of principal executive offices)

(941) 952-9255(Issuer's telephone number)

Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the issuer 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 issuer is a shell company (as
defined in Rule 12b-2 of the Exchange Act): Yes [   ]  
No [X]

As of September 6, 2007, 64,684,904 common shares of the issuer
were issued and outstanding.

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

---

CARBIZ INC.

FORM 10-QSB

For the Quarterly Period Ended July 31, 2007

INDEX

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

---

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)   | our joint venture arrangements;                                                                                                                                                                                                                                      
| |         |                                                                                                                                                                                                                                                                      
| | (xv)    | potential infringement by us of third parties
      proprietary rights;                                                                                                                                                                                             
| |         |                                                                                                                                                                                                                                                                      
| | (xvi)   | defects in our products;                                                                                                                                                                                                                                             
| |         |                                                                                                                                                                                                                                                                      
| | (xvii)  | litigation exposure related to refund anticipation
      loans;                                                                                                                                                                                                      
| |         |                                                                                                                                                                                                                                                                      
| | (xviii) | our compliance with privacy laws;                                                                                                                                                                                                                                    
| |         |                                                                                                                                                                                                                                                                      
| | (xix)   | our ability to obtain adequate remedies in the event that
      our intellectual property rights are violated; and                                                                                                                                                   
| |         |                                                                                                                                                                                                                                                                      
| | (xx)    | our ability to develop and market on a timely and
      cost-effective basis new products that meet changing market
    conditions.                                                                                                                                  

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.

---

|PART 1  FINANCIAL INFORMATION       
|-------------------------------------
|                                     
|Item 1. Financial Statements         
|CARBIZ INC.                          
|Condensed Consolidated Balance Sheets
|(expressed in
      U.S. dollars)    

|                                                                              |   | As at               |   |   | As at            |  
|----------------------------------------------------------------------------- | - | ------------------- | - | - | ---------------- | -
|                                                                              |   | July
      31, 2007 |   |   | January 31, 2007 |  
|                                                                              |   | (unaudited)         |   |   |                  |  
|ASSETS                                                                        |   |                     |   |   |                  |  
|CURRENT                                                                       |   |                     |   |   |                  |  
|Cash and cash
      equivalents                                               | $ | 91,284              |   | $ | 67,990           |  
|Accounts receivable, net                                                      |   | 49,817              |   |   | 48,482           |  
|Current portion of
      notes receivable, net                                |   | 394,661             |   |   | 274,151          |  
|Inventory                                                                     |   | 145,137             |   |   | 67,785           |  
|Prepaids and other
      assets                                               |   | 120,221             |   |   | 171,350          |  
|Deferred costs                                                                |   | 8,453               |   |   | 13,309           |  
|                                                                              |   | 809,573             |   |   | 643,067          |  
|NOTES RECEIVABLE, NET                                                         |   | 147,401             |   |   | 44,887           |  
|DEFERRED FINANCING COSTS                                                      |   | 818,352             |   |   | -                |  
|DEFERRED COSTS                                                                |   | 808                 |   |   | 3,706            |  
|PROPERTY AND EQUIPMENT                                                        |   | 59,550              |   |   | 76,054           |  
|                                                                              | $ | 1,835,684           |   | $ | 767,714          |  
|                                                                              |   |                     |   |   |                  |  
|LIABILITIES                                                                   |   |                     |   |   |                  |  
|CURRENT                                                                       |   |                     |   |   |                  |  
|Accounts payable and accrued
      liabilities                                | $ | 516,053             |   | $ | 1,232,610        |  
|Loan payable                                                                  |   |                     |   |   |                  |  
|Related party                                                                 |   | -                   |   |   | 230,000          |  
|Line
      of credit                                                          |   | 257,725             |   |   | -                |  
|Current portion of capital leases                                             |   | 8,027               |   |   | 7,662            |  
|Current portion of
      long-term debt                                       |   | -                   |   |   | 180,139          |  
|Convertible debenture                                                         |   | 472,999             |   |   | -                |  
|Derivative liability                                                          |   | 6,796,042           |   |   | 3,415,679        |  
|Deferred revenue                                                              |   | 121,190             |   |   | 121,239          |  
|                                                                              |   | 8,172,036           |   |   | 5,187,329        |  
|DEFERRED REVENUE                                                              |   | 5,384               |   |   | 49,805           |  
|CAPITAL LEASES                                                                |   | 6,617               |   |   | 10,724           |  
|LONG-TERM DEBT                                                                |   | -                   |   |   | 35,851           |  
|                                                                              |   | 8,184,037           |   |   | 5,283,709        |  
|MINORITY INTEREST                                                             |   | 205,136             |   |   | 206,170          |  
|STOCKHOLDERS' DEFICIENCY                                                      |   |                     |   |   |                  |  
|COMMON SHARES                                                                 |   | 16,274,119          |   |   | 16,274,119       |  
|Unlimited shares
      authorized, 64,224,404 and 64,224,404 common shares    |   |                     |   |   |                  |  
|issued and outstanding as at July 31
      and January 31, 2007, respectively |   |                     |   |   |                  |  
|ADDITIONAL PAID-IN CAPITAL                                                    |   | 6,342,997           |   |   | 6,222,397        |  
|OTHER COMPREHENSIVE LOSS                                                      |   | (385,197            | ) |   | (385,197         | )
|ACCUMULATED DEFICIT                                                           |   | (28,785,408         | ) |   | (26,833,484      | )
|                                                                              |   | (6,553,489          | ) |   | (4,722,165       | )
|                                                                              | $ | 1,835,684           |   | $ | 767,714          |  

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

1

---

|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            |  
|                                  |   | 2007                       |   |   | 2006                     |  
|                                  |   |                            |   |   |                          |  
|                                  |   |                            |   |   |                          |  
|SALES                             |   |                            |   |   |                          |  
|Software and Consulting Services  | $ | 581,674                    |   | $ | 639,434                  |  
|Used Car Sales and Financing      |   | 361,717                    |   |   | 250,825                  |  
|                                  |   | 943,391                    |   |   | 890,259                  |  
|COST OF SALES                     |   |                            |   |   |                          |  
|Software and Consulting Services  |   | 243,652                    |   |   | 237,806                  |  
|Used Car Sales and Financing      |   | 275,189                    |   |   | 251,531                  |  
|                                  |   | 518,841                    |   |   | 489,337                  |  
|GROSS PROFIT                      |   | 424,550                    |   |   | 400,922                  |  
|GAIN ON DEBT FORGIVENESS          |   | -                          |   |   | -                        |  
|PERSONNEL EXPENSES                |   | 288,887                    |   |   | 251,831                  |  
|SELLING EXPENSES                  |   | 116,875                    |   |   | 87,851                   |  
|OTHER OPERATING EXPENSES          |   | 1,158,221                  |   |   | 294,386                  |  
|                                  |   | 1,563,983                  |   |   | 634,068                  |  
|OPERATING LOSS                    |   | (1,139,433                 | ) |   | (233,146                 | )
|                                  |   |                            |   |   |                          |  
|INTEREST AND OTHER EXPENSES       |   | (149,430                   | ) |   | (96,609                  | )
|LOSS ON DERIVATIVE INSTRUMENT     |   | (1,430,363                 | ) |   | -                        |  
|MINORITY INTEREST                 |   | 7,128                      |   |   | 13,243                   |  
|NET LOSS FROM                     |   |                            |   |   |                          |  
|CONTINUING OPERATIONS             |   | (2,712,098                 | ) |   | (316,512                 | )
|INCOME FROM                       |   |                            |   |   |                          |  
|DISCONTINUED OPERATIONS           |   | -                          |   |   | 411,591                  |  
|                                  |   |                            |   |   |                          |  
|NET INCOME (LOSS)                 | $ | (2,712,098                 | ) | $ | 95,079                   |  
|NET INCOME (LOSS) PER SHARE FROM  |   |                            |   |   |                          |  
|CONTINUING OPERATIONS             | $ | (0.04                      | ) | $ | (0.01                    | )
|NET INCOME (LOSS) PER SHARE FROM  |   |                            |   |   |                          |  
|DISCONTINUED OPERATIONS           | $ | -                          |   | $ | 0.01                     |  
|                                  |   |                            |   |   |                          |  
|NET INCOME (LOSS) PER SHARE       | $ | (0.04                      | ) | $ | -                        |  
|                                  |   |                            |   |   |                          |  
|                                  |   |                            |   |   |                          |  
|WEIGHTED AVERAGE NUMBER OF COMMON |   |                            |   |   |                          |  
|SHARES OUTSTANDING                |   | 64,224,404                 |   |   | 41,136,186               |  

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

2

---

|CARBIZ INC.                                    
|-----------------------------------------------
|Condensed Consolidated Statements of Cash Flows
|(unaudited)                                    
|(expressed in
      U.S. dollars)              

|                                                                         |   | For the Six Months Ended |  
|------------------------------------------------------------------------ | - | ------------------------ | -
|                                                                         |   | July
      31, 2007      |  
|NET INFLOW (OUTFLOW) OF CASH RELATED                                     |   |                          |  
|TO THE FOLLOWING ACTIVITIES                                              |   |                          |  
|OPERATING                                                                |   |                          |  
|Net income (loss)                                                        | $ | (1,951,924               | )
|Items not affecting cash                                                 |   |                          |  
|Depreciation
      of property and equipment                             |   | 38,642                   |  
|Minority interest                                                        |   | (1,034                   | )
|Loss
      on disposal of assets                                         |   |                          |  
|Loss on derivative
      financial instruments                           |   | 751,742                  |  
|Gain
      on debt forgiveness                                           |   | (391,337                 | )
|Amortization
      of deferred finaning costs                            |   | 33,818                   |  
|Amortization
      of debt discount                                      |   | 89,912                   |  
|Stock-based
      compensation                                           |   | 120,600                  |  
|Provision
      for bad debts                                            |   | (11,085                  | )
|                                                                         |   |                          |  
|Net changes in non-cash
      operating assets and liabilities           |   |                          |  
|Accounts receivable                                                      |   | (966                     | )
|Notes
      Receivable                                                   |   | (212,308                 | )
|Prepaids and
      other assets                                          |   | 30,295                   |  
|Inventory                                                                |   | (77,352                  | )
|Deferred costs                                                           |   | 7,754                    |  
|Accounts
      payable and accrued liabilities                           |   | (355,220                 | )
|Deferred revenue                                                         |   | (44,470                  | )
|NET CASH FLOWS FROM OPERATING
      ACTIVITIES                           |   | (1,972,933               | )
|INVESTING                                                                |   |                          |  
|Acquisition of property and equipment                                    |   | (22,138                  | )
|NET CASH FLOW FROM INVESTING ACTIVITIES                                  |   | (22,138                  | )
|FINANCING                                                                |   |                          |  
|Repayment of capital leases                                              |   | (3,742                   | )
|Proceeds from line of credit                                             |   | 257,725                  |  
|Repayment long-term debt                                                 |   | (215,990                 | )
|Repayment of related party
      debt                                    |   | (230,000                 | )
|Proceeds from Trafalgar debenture, including
      derivative components |   | 2,412,051                |  
|Payment of deferred financing
      costs                                |   | (446,087                 | )
|Issuance
      of share capital                                          |   | -                        |  
|NET CASH FLOWS FROM FINANCING ACTIVITIES                                 |   | 1,773,957                |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                  |   |                          |  
|AND CASH EQUIVALENTS                                                     |   | 244,408                  |  
|INCREASE (DECREASE) IN CASH AND                                          |   |                          |  
|CASH EQUIVALENTS                                                         |   | 23,294                   |  
|CASH AND CASH EQUIVALENTS,                                               |   |                          |  
|BEGINNING OF PERIOD                                                      |   | 67,990                   |  
|CASH AND CASH EQUIVALENTS,                                               |   |                          |  
|END OF PERIOD                                                            | $ | 91,284                   |  

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

3

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|1. | ORGANIZATION AND BUSINESS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | 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, 2007 and
      2006 financial statements, which are necessary for a fair financial
      statement presentation. The results for the six months ended July 31, 2007
      and 2006 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,
      2007 which are included in the Companys Form 10KSB filed with the U.S.
      Securities and Exchange Commission (the SEC) on April 20, 2007 (January
      31, 2007 Form 10KSB).                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | References to the Company typically include the Companys
      consolidated subsidiaries and joint venture. The Companys operations are
      principally conducted through its two operating subsidiaries, Carbiz USA,
      Inc., a Delaware corporation, and Carbiz Auto Credit, Inc. (CAC), and a
      joint venture, Carbiz Auto Credit JV1, LLC (JV1). Collectively, Carbiz
      Inc., Carbiz USA, Inc., CAC , 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 developing, marketing,
      distributing and supporting software and Internet products for the
      automotive sales finance industry. The Company also previously supplied a
      seasonal lead generation product that facilitates tax-refund loans which
      are primarily used for down payments on car loans. The assets associated
      with this business segment, however, were sold on May 16, 2006. During the
      six months ended July 31, 2007, the Company operated two CAC dealerships
      and a third location under its JV1 joint venture, all of which sell and
      finance used automobiles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Going concern assumption                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | While these 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 year (exclusive
        of the loss on derivative instruments and gain on debt forgiveness) and
        in each of the past several years. In addition, the Company has a working
        capital deficiency (excluding derivative liability) of $(566,421) as at
        July 31, 2007. This deficiency grows to $(7,362,463) when you include
        the derivative liability of $6,796,042. The Companys continued existence
        is dependent upon its ability to achieve profitable operations and to
        obtain additional financing. The Company has expanded operations in its
        existing CAC dealerships and expects to open new dealerships with the
        proceeds available under its new line of credit (see Note 5). The Company
        believes that the new CAC dealerships, combined with its existing software
        and consulting businesses 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 assumption were not appropriate to
      these financial statements, then adjustments would be necessary in the
      carrying values of assets and liabilities, the reported net loss and the
      balance sheet classifications used.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

4

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|2. | SUMMARY OF ACCOUNTING POLICIES                                                                                                                                                                                                                                                     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                    
|   | Inventory                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                    
|   | Inventory consists of used vehicles and is related to the
      CAC 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 financing costs related to the convertible
      debentures and line of credit discussed in Notes 4 and 5 and are amortized
      over the respective terms of the debt to which the costs related. Future
      amortization of these costs is expected to be as
follows:

Periods ending
      July 312008
    
    
    
    $
    350,4552009
    
    
    
    
    240,3562010
    
    
    
    
    86,2172011
    
    
    
    
    86,2172012
    
    
    
    
    55,107$
    818,352


Earnings per share

Earnings per share are based on the
weighted average number of common shares outstanding (basic) adjusted, to the
extent they are dilutive, for outstanding stock options and stock purchase
warrants (diluted). The calculation of diluted earnings per share excludes any
potential conversion of warrants or options that would increase earnings per
share or decrease loss per share.

The weighted average number of common
shares outstanding (basic) for the six months ended July 31, 2007 does not
include 3,400,000 non-vested restricted shares issued for the 2007 Incentive
Stock Plan, 30,000,000 shares pledged in support of the Trafalgar Debentures (as
defined in Note 4 herein), 8,438,041 common share options outstanding, or the
warrants outstanding which are summarized in Note 6 herein because these
instruments are priced in excess of market. Diluted net income per share for the
period, including these securities, was no different than the basic net income
per share.

Stock-based compensation

Effective, February 1, 2006, the
Company adopted Statement of Financial Accounting Standards (SFAS), No.
123(R), Share-Based Payment, (SFAS 123R). This statement is a revision of
SFAS 123 and supersedes Accounting Principle Board Opinion No. 25, Accounting
for Stock Issued to Employees, (APB Opinion 25). SFAS 123R requires all stock
options to be recognized in the financial statements based on their fair values.
The Company adopted SFAS 123R using the modified prospective method, which
requires application of the standard to all options granted, modified,
repurchased or cancelled on or after February 1, 2006, and to all options
granted that were unvested as of February 1, 2006.

No stock options were granted during
the six months ended July 31, 2007.

During the six months ended July 31,
2007, the Company recognized stock-based compensation expense of $56,000 as a
result of new options issued on January 19, 2007. See Note 12(e) to the January
31, 2007 Form 10-KSB.

In addition, 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. During the six months
ended July 31, 2007 the Company recognized stock-based compensation expense of
$64,600 as a result of this restricted stock transaction. See Note 11 to the
January 31, 2007 Form 10KSB.

5

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|2. | SUMMARY OF ACCOUNTING POLICIES
  (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Stock-based compensation(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Total options outstanding and vested at July 31, 2007
      were with a weighted average exercise price of $0.23 per share and a
      weighted average life of 1.8 years. In addition, non-vested options of
      5,600,000 were outstanding at July 31, 2007 with an exercise price of
      $0.13 per share and life of 4.5 years. The Company expects to record a
      total of an additional $376,456 of compensation expense during periods
      subsequent to July 31, 2007 for non-vested options as of that date. The
      intrinsic value of all options outstanding and vested at July 31, 2007 was
      $655,056.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Derivative Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | We review the terms of our convertible debt and equity
      instruments to determine whether there are embedded derivative
      instruments, including the embedded conversion option, that are required
      to be bifurcated and accounted for separately as a derivative financial
      instrument. In circumstances where the convertible instrument contains
      more than one embedded derivative instrument, including the conversion
      option, that is required to be bifurcated, the bifurcated derivative
      instruments are accounted for as a single, compound derivative instrument.
      Also, in connection with the sale of convertible debt and equity
      instruments, we may issue freestanding options or warrants that may,
      depending on their terms, be accounted for as derivative instrument
      liabilities, rather than as equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | For derivative financial instruments that are accounted
      for as liabilities, the derivative instrument is initially recorded at its
      fair value and is then re-valued at each reporting date, with changes in
      the fair value reported as charges or credits to operations. We estimate
      fair values of derivative financial instruments using various techniques
      (and combinations thereof) that are considered to be consistent with the
      objective of measuring fair value. In selecting the appropriate technique,
      we consider, among other factors, the nature of the instrument, the market
      risks that it embodies and the expected means of settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | For less complex derivative instruments, such as
      freestanding warrants, we generally use the Black-Scholes- Merton option
      valuation model because it embodies all of the requisite assumptions
      (including trading volatility, estimated terms and risk free rates)
      necessary to fair value these instruments. For complex derivative
      instruments, such as embedded conversion options, we generally use the
      Flexible Monte Carlo valuation technique because it embodies all of the
      requisite assumptions (including credit risk, interest-rate risk and
      exercise/conversion behaviors) that are necessary to fair value these more
      complex instruments. Estimating fair values of derivative financial
      instruments requires the development of significant and subjective
      estimates that may, and are likely to, change over the duration of the
      instrument with related changes in internal factors and external market
      indicators. In addition, option based techniques are highly volatile and
      sensitive to changes in our trading market price which has a
      high-historical volatility. Since derivative financial instruments are
      initially and subsequently carried at fair values, our income reflects the
      volatility in these estimate and assumption changes.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | CONVERTIBLE DEBENTURES  2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | On September 1, 2006 the Companys SB-2 registration
      statement was declared effective by the U.S. Securities and Exchange
      Commission (SEC). Effective October 3, 2006, the approximately
      US$1,406,529 of debenture financing which closed on April 6, 2006
      (described in Note 9(a) of the January 31, 2007 Form 10KSB) and
      accumulated interest of $76,805 were converted into 13,842,027 common
      shares, 14,472,753 Class A Common Share Purchase Warrants and 7,236,355
      Class B Common Share Purchase Warrants (the Conversion).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The 14,472,753 Class A Common Share Purchase Warrants
      related to 13,124,494 debenture principal, 717,533 debenture interest, and
      630,723 penalty interest warrants. The 7,236,372 Class B Common Share
      Purchase Warrants related to 6,562,247 debenture principal, 358,766
      debenture interest, and 315,342 penalty interest warrants. Each class A
      common share purchase warrant and each class B common share
  purchase                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

6

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|3. | CONVERTIBLE DEBENTURES  2004
(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | warrant is exercisable for one common share expiring from
      October 6, 2009 through April 6, 2011, quantities summarized in Note 6(e)
      herein, and an exercise price of CDN$0.12.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4. | CONVERTIBLE DEBENTURES - TRAFALGAR                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On February 28, 2007 the Company sold $2,500,000 Secured
      Convertible Debentures to Trafalgar Capital Specialized Investment Fund,
      Luxembourg (Trafalgar) and (Trafalgar Debentures). Of this amount,
      $1,000,000 was released upon execution (March 2, 2007), $750,000 was
      released after the Company filed a Registration Statement on Form SB-2
      (April 17, 2007) and the $750,000 balance was released on June 27, 2007.
      The Trafalgar Debentures bear an interest rate of 12% compounded monthly
      from the date of issuance until the Company filed the Registration
      Statement (April 17, 2007), 10% compounded monthly from the date the
      registration was filed until it becomes effective, and 8% per annum
      thereafter until the Trafalgar Debentures are paid in full. The Company
      responded to initial SEC comments and filed an amended Registration
      Statement on July 9, 2007 and a second amendment on August 30,
  2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Trafalgar Debentures are convertible at Trafalgars
      option into common shares of the Company at a price per share equal to the
      lesser of (i) US$0.22 or (ii) 85% of the lowest daily closing bid price of
      the Companys common shares, as quoted by Bloomberg, L.P. for the five
      trading days immediately preceding the date of conversion. The Trafalgar
      Debentures are secured by a pledge of 30,000,000 common shares of the
      Company. These shares are held in escrow, not considered issued and
      outstanding and, therefore, they are not considered in earnings per share
      calculation. See Note 2 herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | As mentioned above, the filing of the Companys
      Registration Statement resulted in the release of the second tranche of
      funding ($750,000 on April 17, 2007), and the third tranche ($750,000 on
      June 27, 2007) provided, further, that failure by the Company to have it
      declared effective could result in the Company having to pay liquidated
      damages to Trafalgar.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In addition, the Company issued to Trafalgar warrants to
      purchase up to an aggregate of 2,500,000 common shares of the Company at a
      strike price of US$0.15 per share, exercisable over the next 5
    years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | When we evaluated the Trafalgar Debentures and warrants,
      we concluded that equity classification was not appropriate under EITF
      00-19, Accounting for Derivative Financial Instruments Indexed to, and
      Potentially Settled in, a Companys Own Stock. Accordingly we allocated
      proceeds from the debentures to the detachable warrants, the compound
      derivative embedded in the convertible debenture, and the convertible
      debenture itself in the amounts of $562,500, $1,657,833, and $355,685
      respectively, based upon the fair values of these financial instruments.
      The compound derivatives arising from bifurcation comprises (i) the
      embedded conversion option, (ii) mandatory redemption feature, (iii)
      equity-interest payments, and (iv) cash payable puts. Because the
      aggregate fair values of these derivative instrument liabilities exceeded
      the gross proceeds, we recognized a day-one derivative loss amounting to
      $101,058. At July 31, 2007 the Company had incurred: (a) $376,083 of
      deferred financing costs and amortized $34,081 to interest expense on a
      straight line basis; (b) $90,833 of prepaid interest was deducted by
      Trafalgar and $58,541 amortized to interest expense; (c) $89,912 of debt
      discount was amortized to interest expense leaving a debenture balance of
      $472,999; (d) the warrants were revalued at fair value of $460,500 (see
      Note 6 herein) with a resulting loss on derivative instrument of $195,750;
      and (e) the compound derivative revalued at fair value of $1,521,360 (see
      Note 6 herein) with a resulting gain on derivative instrument of
      $315,482.

7

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|4. | CONVERTIBLE DEBENTURES  TRAFALGAR
    (continued)                                                                                                                                                                                                             
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                
|   | The convertible debentures are payable interest only
      through January 2008 and thereafter in monthly installments through
      February 2009, at which time the then remaining $700,000 balance is due.
      Annual principal maturities are as follows:

Year ending July
      312008
    
    
    
    $
    750,00002009
    
    
    
    
    1,750,0002,500,000Less unamortized discount
    
    
    
    
    (2,027,091
    )$
    472,999


|5. | LINE OF CREDIT FINANCING                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | On March 23, 2007, Carbiz USA, Inc., Carbiz Auto Credit,
      Inc. and Carbiz Auto Credit JV1, LLC, as borrowers and Carbiz, Inc., as
      guarantor, entered into a Loan and Security Agreement (the Loan
      Agreement) with Colossus Capital Fund, L.P (the Credit Facility). The
      Credit Facility has a maximum commitment of $10 million, and expires on
      March 23, 2011. The initial amount of the Credit Facility is $5 million.
      The amount may be increased to $10 million at the option of the Company.
      The Credit Facility is secured by a first priority interest in all the
      existing and after acquired tangible and intangible assets of the Company.
      The Credit Facility may be used to finance the Companys working capital
      needs.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Advances under the Credit Facility are limited to the
      lesser of (A) the total amount of the Credit Facility or (B) the lesser of
      (i) 58% of the outstanding balance of all Eligible Receivables (as defined
      in the Loan Agreement), or (ii) 100% of the Companys cost basis in the
      Eligible Receivables. All borrowings accrue interest at 15% per annum and
      upon the occurrence and during the continuance of an event of default, the
      interest rate will be increased by 6% per annum.                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Under the Loan Agreement, the Company was
  required:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| | (i)   | to pay a facility commitment fee of $75,000;                                                                                                                                                                                    
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                 
| | (ii)  | to pay a second facility commitment fee of $75,000 if the
      Company elects to increase the amount of the credit facility to
      $10,000,000;                                                                              
| |       |                                                                                                                                                                                                                                 
| | (iii) | to pay an asset management fee of $5,000 per quarter,
      which will increase to $10,000 per quarter upon increase of the amount of
      the Credit Facility to $10 million;                                                 
| |       |                                                                                                                                                                                                                                 
| | (iv)  | to pay an unused facility fee of 0.50%, payable month in
      arrears, on the difference between (A) the total amount of the Credit
      Facility and (B) the actual average daily amount outstanding for the
      month; and
| |       |                                                                                                                                                                                                                                 
| | (v)   | to pay a termination fee if the Credit Facility is fully
      repaid and terminated prior to the maturity date. Such termination fee may
      range from 4.0% to 1.0% of the total amount of the Credit
  Facility.           

In addition, the Credit Facility
contains customary financial covenants and provides for customary events of
default. At July 31, 2007 the Company had total outstanding borrowings under the
Credit Facility of $257,725.

At July 31, 2007 interest expense from
  commencement of the facility through July 31, 2007 was $12,917 and the Company
  had incurred approximately $446,087 of deferred financing costs which will be
  amortized on a straight line basis over the sixty month life of the line of
  credit.

8

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|6. | DERIVATIVE LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (a) 2004 Debenture Conversion Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Evaluation of criteria under EITF Issue No. 00-19
      resulted in the determination that the Companys outstanding warrants
      issued upon conversion of the 2004 Debentures (See Note 3 herein) should
      be classified as a derivative liability. In accordance with EITF 00-19,
      warrants which are determined to be classified as derivative liabilities
      are marked to market each reporting period, with a corresponding non-cash
      gain or loss reflected in the current period.                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (b) Agent Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | As described in Note 9(a) and (e) of the January 31, 2007
      Form 10KSB, the Company had engaged an agent for the 2004 Convertible
      Debenture financing. Accordingly, the Company also issued as of October 3,
      2006 438,100 common share purchase warrants, with each warrant exercisable
      for one common share until October 3, 2011 at an exercise price of
      CDN$0.23, and 438,100 common share purchase warrants, with each warrant
      exercisable for one common share until October 3, 2011 at an exercise
      price of CDN$0.22. These 876,200 warrants were determined to be derivative
      liabilities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (c) Private Placement Warrants - 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | As a result of an unregistered sale of equity securities
      in September, 2006 the Company issued 2,400,000 of share purchase warrants
      for two years at an exercise price of $0.15. Concurrently, related party
      debt held by two directors of the Company was converted to common shares
      and the Company issued 1,565,464 share purchase warrants under the same
      terms. These 3,965,464 warrants were determined to be derivative
      liabilities.                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (d) Trafalgar Debenture Warrants and Embedded Compound
      Derivative  2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | As described in Note 4 herein, the Company issued
      2,500,000 share purchase warrants for five years and an embedded compound
      derivative in conjunction with the Trafalgar Debenture financing and these
      instruments were determined to be derivative liabilities.                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (e) Total Warrants and Compound Derivative
      Liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | As of July 31, 2007 the Company
      had derivative liability as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                                                            |  | Warrants   |  |   | Amount    | 
| | ---------------------------------------------------------- |  | ---------- |  | - | --------- | 
| | 2004 Conversion Warrants expiring October
      6, 2009    |  | 10,339,567 |  | $ | 1,911,333 | 
| | 2004 Conversion Warrants expiring October 10, 2010         |  | 11,055,264 |  |   | 2,074,044 | 
| | 2004 Conversion Warrants expiring April 6,
      2011      |  | 314,276    |  |   | 61,747    | 
| | 2006 Private Placement Warrants expiring September 5, 2008 |  | 3,965,464  |  |   | 603,574   | 
| | 2004 Agent Warrants expiring October 6,
      2011         |  | 876,200    |  |   | 163,485   | 
| | 2007 Trafalgar Warrants expiring February 28, 2012         |  | 2,500,000  |  |   | 460,500   | 
| | 2007 Trafalgar Embedded Derivative                         |  | -          |  |   | 1,521,360 | 
| |                                                            |  |            |  |   |           | 
| |                                                            |  | 29,050,771 |  | $ | 6,796,042 | 

This derivative liability is adjusted
quarterly based on a value model discussed in Note 2 herein and any changes in
fair value are recorded as gain or loss on derivative financial instruments in
the consolidated statements of operations.

9

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|7. | CASH FLOW INFORMATION       
|-- | ----------------------------
|   |                             
|   | (a) Supplemental
Information

| |                                          |   | Six months ended    | 
| | ---------------------------------------- | - | ------------------- | 
| |                                          |   | July
      31, 2007 | 
| | Cash paid during the period for Interest | $ | 113,915             | 

|   | (b) Supplemental non-cash information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | During the six months ended July 31, 2006, the Company
      extended certain convertible debentures which were treated as an
      extinguishment and re-issuance of debt in the amount of $1,396,305 and as
      such have not been included in the statements of cash flows. See Note 9(a)
      to the January 31, 2007 Form 10KSB. 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 to and capitalized as deferred
      financing costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | During the six months ending July 31, 2007, the Company
      negotiated the settlement of a $466,337 trade payable which resulted in a
      gain on debt forgiveness of $391,337.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|8. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On February 28, 2005, the Company entered into a joint
      venture agreement (JV1) with a member of the Company's Board of Directors
      (the JV1 Agreement). The purpose of this joint venture is to add five
      additional CAC centers in the state of Florida over five years. Under the
      JV1 Agreement, the Company will contribute its intellectual property and
      permanent, non-exclusive license agreements in exchange for a 50% share of
      the joint venture. The director/joint venture partner contributed $500,000
      for the remaining 50% share. In April 2005, JV1 signed a five-year lease
      for the premises of the first center, at a price of $31,200
    annually.                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company accounts for the joint venture using FASB
      Interpretation No. 46, Consolidation of Variable Interest Entities.The primary objectives of this interpretation are to provide guidance
      on the identification of entities for which control is achieved through
      means other than through voting rights (variable interest entities) and
      how to determine when and which business enterprise (the primary
      beneficiary) should consolidate the variable interest entity. Because the
      joint venture is operated as a CAC location and is fully integrated under
      the daily control and management of the Company, the Company is, under
      this guidance, the primary beneficiary. Accordingly operational revenue
      and expenses, and all assets and liabilities are fully consolidated. The
      50% share of the joint venture not owned by the Company is presented on
      the Minority Interest line item on the Consolidated Balance Sheets. A
      Summary of 100% of the joint venture revenues and expenses and assets are
      listed below:

| |                         |   | Six Months Ended    |  
| | ----------------------- | - | ------------------- | -
| |                         |   | July
      31, 2007 |  
| | Sales                   | $ | 272,884             |  
| | Cost of sales           |   | 210,558             |  
| | Gross Profit            |   | 62,325              |  
| | Operating Expenses (1)  |   | 64,393              |  
| | Operating Income (Loss) | $ | (2,068              | )
| | Depreciation            |   | (557                | )
| | Net Income (Loss)       | $ | (2,625              | )
| | Total Assets            | $ | 427,671             |  

During the fourth quarter of the fiscal
year ended January 31, 2007 the Company borrowed $230,000 on a short term,
informal, non-interest bearing basis from a company owned by a significant
stockholder. The amount was paid off in June 2007 with some of the proceeds from
Trafalgar  Tranche # 3.

10

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|9. | SEGMENT INFORMATION FOR CONTINUING
    OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company operates and manages its business in three
      segments, which are its used car sales and financing segment (Carbiz Auto
      Credit or CAC), its used car sales and financing joint venture (JV1),
      and various software and consulting services offered to independent car
      dealerships (Software and Other Products). Approximately 99% of the
      Companys revenue is generated in the United States. In addition almost
      all of the Companys assets are located in the U.S. A fourth business
      segment, TaxMax, a tax preparation service, was sold on May 16, 2006. The
      Company has eliminated TaxMax from the segment information. See Note 10
      herein.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | CAC purchases automobiles through auctions and sells them
      to end users at three car lots located in the State of Florida. When
      required, the Company will also finance these sales with loans that are
      generally 80 weeks in length.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Software and Other Products consists of new sales and
      recurring monthly revenues for software products, and new sales and
      recurring monthly revenues of consulting products, and other related
      revenue from credit bureau fees, supply sales and forms
  programming.                                                                                                                                                                                                                                                                                                                                                                                                                                 

11

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|9. | SEGMENT INFORMATION FOR CONTINUING OPERATIONS
      (continued)
|-- | ---------------------------------------------------------------

| | Three months ended
      July 31 |   | 2007        |  
| | -------------------------------- | - | ----------- | -
| |                                  |   | Carbiz Auto |  
| |                                  |   |             |  
| |                                  |   | Credit      |  
| | Sales                            | $ | 223,340     |  
| | Cost of Sales                    |   | 160,099     |  
| | Gross Profit                     |   | 63,241      |  
| | Operating Expenses
      (1)     |   | 99,576      |  
| | Income (Loss) From Segments      | $ | (36,335     | )
| | Depreciation & Amortization      |   |             |  
| | Total Operating Income (Loss)    |   |             |  
| |                                  |   |             |  
| | Total Assets                     | $ | (584,986    | )

| |                               |   | 2006     |  
| | ----------------------------- | - | -------- | -
| | Sales                         | $ | 193,198  |  
| | Cost of Sales                 |   | 196,415  |  
| | Gross Profit                  |   | (3,217   | )
| | Operating Expenses
      (1)  |   | 56,814   |  
| | Income (Loss) From Segments   | $ | (60,031  | )
| | Depreciation & Amortization   |   |          |  
| | Total Operating Income (Loss) |   |          |  
| | Total Assets                  | $ | (407,053 | )

| | Six months ended
      July 31 |   | 2007        |  
| | ------------------------------ | - | ----------- | -
| |                                |   | Carbiz Auto |  
| |                                |   |             |  
| |                                |   | Credit      |  
| | Sales                          | $ | 359,439     |  
| | Cost of Sales                  |   | 262,433     |  
| | Gross Profit                   |   | 97,007      |  
| | Operating Expenses
      (1)   |   | 141,454     |  
| | Income (Loss) From Segments    | $ | (44,447     | )
| | Depreciation & Amortization    |   |             |  
| | Gain on Debt Forgiveness       |   |             |  
| | Total Operating Income (Loss)  |   |             |  
| | Total Assets                   | $ | (584,986    | )

| |                               |   | 2006     |  
| | ----------------------------- | - | -------- | -
| | Sales                         | $ | 330,417  |  
| | Cost of Sales                 |   | 359,967  |  
| | Gross Profit                  |   | (29,550  | )
| | Operating Expenses
      (1)  |   | 89,552   |  
| | Income (Loss) From Segments   | $ | (119,102 | )
| | Depreciation & Amortization   |   |          |  
| | Total Operating Income (Loss) |   |          |  
| |                               |   | (407,053 | )
| | Total Assets                  | $ | (60,758  | )

12

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2007 and 2006                                  
|(unaudited)                                             

|10. | DISCONTINUED OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On May 16, 2006 the Company completed the sale of its
      TaxMax business to Tax Refund Services, Inc. located in Tampa, Florida.
      The proceeds of $442,000 received from the sale will be primarily used to
      expand CAC operations. The book value of the assets sold was $20,575,
      therefore, the Company realized a gain of $421,425 on the disposition. No
      reserves for disposition were deemed appropriate prior to the
  sale.                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In accordance with SFAS No. 144, Accounting for the
      Impairment or Disposal of Long-Lived Assets (SFAS 144), the financial
      results of the TaxMax business have been presented as discontinued
      operations on the financial statements for all periods presented. The
      former segment had revenue of $253,004 for the period beginning February
      1, 2006 through May 16, 2006. The operating income for this period was
      $135,358 plus a gain on disposal of $421,425.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|11. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On August 3, 2007 a warrant holder exercised 460,500 of
      the 2004 Conversion warrants resulting in approximately $52,500 of
      proceeds. The warrant holder is the spouse of an executive officer of the
      company.                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On August 24, 2007 the Company issued warrants for
      1,000,000 common shares at $0.15. The warrants expire on February 28,
      2011. Fair value at date of issuance using the Black-Scholes-Merton
      formula was approximately $140,000. These warrants were determined to be
      derivative liabilities.                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On September 10, 2007 the company sold an additional
      $1,000,000 of Secured Convertible Debentures to Trafalgar under terms
      similar to the previous issue.                                                                                                                                                                                                                                                                                                                                   

13

---

Item 2. Managements Discussion and Analysis or Plan of
Operation

Overview

This Managements Discussion and
Analysis (MD&A) should be read in conjunction with the Companys interim
condensed consolidated financial statements as of July 31, 2007 and the audited
consolidated January 31, 2007 statements and notes reported in US dollars and in
accordance with United States generally accepted accounting principles (GAAP).

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

- Software product and support sales and business model consulting
  services through 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.
- Direct auto sales and related financing (Carbiz Auto Credit centers) through our self provided on-site specialty finance business, which
  includes company owned locations as well as locations owned by our joint
  venture.

Historically, we have been a
software company that has also offered tax return processing services for, and
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. We opened our second credit
center in St. Petersburg, Florida in November 2004, and we opened our third
credit center, a joint venture location, in Tampa, Florida in May 2006. Further,
on May 16, 2006, we sold our TaxMax business to Tax Refund Services Inc. of
Tampa, Florida. As a part of such asset sale, we agreed to enter into a
non-competition agreement and, therefore, we do not intend to provide tax return
processing services in the future.

Rather than continuing to focus
our resources only on our software and consulting businesses, it is our intent
to expand and further diversify our business operations by opening additional
credit centers in the future. Some of these credit centers will be wholly-owned
by us and others may be joint venture arrangements, such as with Carbiz Auto
Credit JV1, LLC, or by acquisition of existing operations.

In terms of our existing software
and consulting businesses, we believe that our Independent Dealer Accounting
(IDA) software and the related consulting will drive our software revenue and
consulting services growth in the near term. To date, it has been installed in
over 30 dealerships, with continuing interest on the part of independent
dealers. We believe that there is an industry-wide movement towards the adoption
of standardized accounting procedures and financial reporting within the
independent dealer population, which consists of non-franchise automotive
dealers, as a result of efforts by NIADA (National Independent Automobile Dealer
Association) and NABD (National Alliance of Buy Here-Pay Here Dealers). We have
worked closely with both of these associations during the development of our IDA
software, and have received the Approved Vendor for Standardized Accounting
designation from NIADA, a designation that indicates to the dealer community
that IDA operates properly in producing appropriate audit trails, transaction
processing, and financial reporting as defined by NIADA. Although NIADA approval
is not required for a company to market its products to independent automobile
dealers, we believe that the NIADA Approved Vendor designation will provide
additional market acceptance of IDA as a specific accounting solution for
independent dealers throughout North America.

Critical Accounting Policies

Revenue Recognition

Our revenue is derived from the
sale of licenses, services and commissions, the sale of products to dealers in
the automobile industry and sale of used vehicles. We recognize 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. 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. For contracts involving multiple deliverables, where the
deliverables are governed by more than one authoritative accounting standard, we
generally apply the Financial Accounting Standards Board Emerging Issues Task
Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables to
determine whether deliverables should be accounted for separately.

14

---

We derive our revenue through the
licensing of software products and providing related services, including
installation, training and support and our Carbiz Auto Credit Buy Here-Pay Here
business. 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. Related services revenue is recognized when a signed
contract has been executed, the services have been delivered, and obligations
have been fulfilled. We also sell and finance used automobiles. 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 is generally 80 weeks, based on the
principal outstanding at the time.

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 the disclosure of contingent
liabilities at the date of the financial statements and the 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 and related costs
and contingencies.

Stock-Based Compensation

Effective February 1, 2006, we
adopted Statement of Financial Accounting Standards (SFAS), No. 123(R),
Share-Based Payment, (SFAS 123R). This statement is a revision of SFAS 123
and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, (APB Opinion 25). SFAS 123R requires all stock options
to be recognized in the financial statements based on their fair values. We
adopted SFAS 123R using the modified prospective method, which requires
application of the standard to all options granted, modified, repurchased or
cancelled on or after February 1, 2006, and to all options granted that were
unvested as of February 1, 2006.

Derivative Liability

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 issued 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.

15

---

Three Months ended July 31, 2007 compared to the Three
Months ended July 31, 2006

Three months ended July 31, 2007 compared to the three
months ended July 31, 2006

|                                                     |   |            |   |  | % of    |   |   |           |   |  | % of    |  
|---------------------------------------------------- | - | ---------- | - |  | ------- | - | - | --------- | - |  | ------- | -
|                                                     |   | July 2007  |   |  | Revenue |   |   | July 2006 |   |  | Revenue |  
|Revenue                                              | $ | 943,391    |   |  | 100.0   |   | $ | 890,259   |   |  | 100.0   |  
|Cost of sales                                        | $ | 518,841    |   |  | 55.0    |   | $ | 489,337   |   |  | 54.9    |  
|Gross profit                                         | $ | 424,550    |   |  | 45.0    |   | $ | 400,922   |   |  | 45.0    |  
|Gain on debt forgiveness                             | $ | -          |   |  |         |   | $ | -         |   |  |         |  
|Operating expenses                                   | $ | 1,563,983  |   |  | 165.8   |   | $ | 634,068   |   |  | 71.2    |  
|Operating income (loss)                              | $ | (1,139,393 | ) |  | (120.8  | ) | $ | (233,146  | ) |  | (26.2   | )
|Interest expense                                     | $ | (149,429   | ) |  | 15.8    |   | $ | (35,438   | ) |  | 10.9    |  
|Gain (loss) on derivative instruments                | $ | (1,430,363 | ) |  | 161.4   |   | $ | -         |   |  |         |  
|Minority interest income (loss)                      | $ | 7,128      |   |  | 0.8     |   | $ | 13,243    |   |  | 1,5     |  
|Net income (loss) from continuing operations         | $ | (2,712,098 | ) |  | (297.2  | ) | $ | (316,512  | ) |  | (35.6   | )
|Net income (loss) from discontinued
      operations | $ |            |   |  | 0.0     |   | $ | 411,591   |   |  | 46.2    |  
|NET INCOME (LOSS)                                    | $ | (2,712,098 | ) |  | (297.2  | ) | $ | 95,079    |   |  | 10.7    |  
|Income (loss) per common share                       | $ |            |   |  |         |   | $ | (0.01     | ) |  |         |  
|Total assets                                         | $ | 1,835,684  |   |  |         |   | $ | 899,156   |   |  |         |  
|Long-term liabilities                                | $ | 12,001     |   |  |         |   | $ | 76,385    |   |  |         |  

Revenue

In the three months ended July
31, 2007, our revenues from continuing operations increased by $53,132 compared
to our three-month revenue during the previous period ended July 31, 2006. This
increase was primarily due to a increase of $110,892 in sales by our Carbiz Auto
Credit operating unit during the first three months of 2007 when compared to the
first three months of 2006. Carbiz Auto Credit generated sales of $361,717,
including $223,340 from our Company-owned locations and $138,377 from our joint
venture location during the three months ended July 31, 2007.

Cost of Sales

Our cost of sales expense increased
  by $29,504 for the three months ended July 31, 2007, compared to same period
  ended July 31, 2006. Carbiz Auto Credit operations cost of sales increased by
  $23,658, including a decrease in costs of $36,316 from our Company-owned locations
  and an increase of $59,974 from our joint venture location during the three
  months ended July 31, 2007, and all other parts of the operation increased cost
  of sales by $5,846 during the three months ended July 31, 2007. We anticipate
  that our cost of sales expense will continue to increase as we open additional
  Carbiz Auto Credit centers in the future.

Expenses

For the three months ended July
31, 2007, our operating expenses increased by $929,915 compared to the same
period ended July 31, 2006. The Carbiz Auto Credit operating expenses increased
by $51,509, including an increase of $49,499 from our Company-owned locations
and and increase of $9,010 from our joint venture location during the three
months ended July 31, 2007, while operating expenses for other segments
increased by $885,405 during the three months ended July 31, 2007. This increase
was primarily due to the effect of changes in the exchange rate for the Canadian
Dollar during the period as a result of the large debenture liability balances
carried on the Companys books in Canadian Dollars. Legal expenses related to
the preparation and closing of the convertibal debenture and credit facility
were also incurred during the period.

We have not been investing
significant amounts in fixed assets over the past two years. This fact is
reflected in the decrease in depreciation and amortization expenses by $7,267
for the three months ended July 31, 2007 as compared to the same period ended
July 31, 2006.

Interest Expense

Our interest expense increased
by $149,428 for the three months ended July 31, 2007, compared to the same
period ended July 31, 2006. Although existing long term debt was retired during
the period, the increase is due to the interest paid on the convertible
debenture and the credit facility.

16

---

Software Sales, Support and Consulting

This segment of our business consists
  of new sales and recurring monthly revenue for software products and new sales,
  new sales and recurring monthly revenue of consulting products, and other related
  products including revenue from credit bureau fees, supply sales, and forms
  programming. Our total software, consulting and other sales during the three
  months ended July 31, 2007 decreased by $57,760 over the prior period ended
  July 31, 2006.

TaxMax

TaxMax was our tax preparation
and refund division. The seasonal nature of our TaxMax business meant that the
significant impact of return preparation operations was recognized during the
first quarter.

As a result of a continued
decline in TaxMax revenue over a three-year period and a desire to focus both
management and cash resources on the higher growth areas of our business,
subsequent to the fiscal year end management decided to enter into an agreement
to sell the TaxMax business. The sale was the result of an unsolicited offer and
was completed during May 2007 to Tax Refund Services, Inc. of Tampa, FL. The
$442,000 cash generated from the sale of TaxMax was used primarily for further
expansion of the Carbiz Auto Credit business. The net income from the sale of
TaxMax as well as the net income generated from the discontinued operations are
now shown as such on the Statement of Operations.

Carbiz Auto Credit

The fastest growing segment of
our business continues to be our Carbiz Auto Credit specialty consumer finance
business. Carbiz operates three facilities in Florida called Carbiz Auto
Credit, that originate, underwrite, fund and collect auto loans to customers
with credit difficulties. The scalable business model leverages our industry
expertise and proprietary underwriting and collection processes.

We believe that the results from
our Palmetto and St. Petersburg corporate locations and Tampa joint venture
location for the year ended January 31, 2007 have indicated a strong consumer
demand for the finance product in that market, as well as reinforcing the
effectiveness of our system for operations, marketing, underwriting and
collections.

The increase in sales activity
during the three months ended July 31, 2007 was the result of a increase in
inventory levels at all three locations due to an increase in cash available for
the purchase of inventory as a result of the convertible debenture and credit
facility.

17

---

Six Month Financial Information

The following summary of selected
financial information for the six months ended July 31, 2007 and 2006 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, 2007 and 2006.

Six months ended July 31, 2007 compared to the six months
ended July 31, 2006

|                                                     |   |            |   |  | % of    |   |   |           |   |  | % of    |  
|---------------------------------------------------- | - | ---------- | - |  | ------- | - | - | --------- | - |  | ------- | -
|                                                     |   | July 2007  |   |  | Revenue |   |   | July 2006 |   |  | Revenue |  
|Revenue                                              | $ | 1,823,976  |   |  | 100.0   |   | $ | 1,648,017 |   |  | 100.0   |  
|Cost of sales                                        | $ | 934,794    |   |  | 51.2    |   | $ | 926,562   |   |  | 56.2    |  
|Gross profit                                         | $ | 889,182    |   |  | 48.8    |   | $ | 721,455   |   |  | 43.8    |  
|Gain on debt forgiveness                             | $ | 391,337    |   |  | 21.5    |   | $ | -         |   |  | -       |  
|Operating expenses                                   | $ | 2,242,798  |   |  | 123.0   |   | $ | 1,309,381 |   |  | 79.5    |  
|Operating income (loss)                              | $ | (962,279   | ) |  | (52.8   | ) | $ | (587,926  | ) |  | (35.7   | )
|Interest expense                                     | $ | (238,937   | ) |  | 13.1    |   | $ | (132,047  | ) |  | 8.0     |  
|Gain (loss) on derivative instruments                | $ | (751,742   | ) |  | (45.2   | ) | $ | -         |   |  | -       |  
|Minority interest income (loss)                      | $ | 1,034      |   |  | 0.1     |   | $ | 23,440    |   |  | 1.4     |  
|Net income (loss) from continuing operations         | $ | (1,951,924 | ) |  | (112.0  | ) | $ | (696,533  | ) |  | (43.3   | )
|Net income (loss) from discontinued
      operations | $ | -          |   |  | -       |   | $ | 556,783   |   |  | 33.8    |  
|NET INCOME (LOSS)                                    | $ | (1,951,924 | ) |  | (112.0  | ) | $ | (139,750  | ) |  | (8.5    | )
|Income (loss) per common share                       | $ | (0.03      | ) |  |         |   | $ | (0.01     | ) |  |         |  
|Total assets                                         | $ | 1,835,684  |   |  |         |   | $ | 899,156   |   |  |         |  
|Long-term liabilities                                | $ | 12,001     |   |  |         |   | $ | 76,385    |   |  |         |  

Revenue

In the six months ended July 31,
2007, our revenues from continuing operations increased by $175,959 compared to
our six-month revenue during the previous period ended July 31, 2006. This
increase was due to an increase of $181,332 in sales by our Carbiz Auto Credit
operating unit and I decrease of $5,372 in sales by our software and consulting
division during the six months ended July 31, 2007 when compared to the same
period ended July 31, 2006. Carbiz Auto Credit generated sales of $632,723,
including $359,439 from our Company-owned locations and $272,884 from our joint
venture location during the six months ended July 31, 2007.

We continued throughout the
period to eliminate non-performing products, such as several older pre-Windows
software products including our GoldKey Buy Here-Pay Here program and our
TurboCAT F&I program. As of January 31, 2007, a majority of users of those
products have replaced the discontinued product with our higher priced, higher
margin products, which will result in a positive impact on future revenues. The
decision to stop support for a specific product is made on the basis of the size
of the remaining user population, the recurring revenue generated by that
product, and the cost and difficulty of maintaining a technical support staff
for the product.

Cost of Sales

Our cost of sales expense
increased by $8,232 for the six months ended July 31, 2007, compared to the same
period ended July 31, 2006. Carbiz Auto Credit operations cost of sales
increased by $9,443, including a decrease in costs of $97,534 from our
Company-owned locations and an increase of $106,997 from our joint venture
location during the six months ended July 31, 2007, and all other parts of the
operation decreased cost of sales by $1,211 during the six months ended July 31,
2007. The decrease in cost of sales in our Company-owned locations even though
sales increased was the result of a decrease in direct bad debt charge off
expense compared to the same period ended July 31, 2006, while the increase in
cost of sales in our joint venture location was the direct result of additional
sales compared to the same period ended July 31, 2006. We anticipate that our
cost of sales expense will increase in direct proportion to increased auto sales
as we open additional Carbiz Auto Credit centers in the future.

Gain on debt forgiveness

During the six months ending July
31, 2007, the Company negotiated the settlement of a $466,337 trade payable
which resulted in a gain on debt forgiveness of $391,337.

18

---

Expenses

For the six months ended July 31,
2007, our operating expenses increased by $933,417 compared to the same period
ended July 31, 2006. The Carbiz Auto Credit operating expenses increased by
$52,886, including an increase of $51,902 from our Company-owned locations and
an increase of $984 from our joint venture location during the six months ended
July 31, 2007, while operating expenses for other segments increased by $885,190
during the six months ended July 31, 2007. While overall operating expenses
increased primarily due to currency exchange expense and legal expense,
personnel expense and selling expense increased by a total of $46,532 as a
result of increased advertising and additional staff at all locations.

We have not been investing
significant amounts in fixed assets over the past two years. This fact is
reflected in the decrease in depreciation and amortization expenses by $4,658
for the six months ended July 31, 2007 as compared to the same period ended July
31, 2006.

Interest Expense

Our interest expense increased by
$106,890 for the six months ended July 31, 2007, compared to the same period
ended July 31, 2006, as a result of the closing of the convertible debenture 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 Colossus Capital Fund, L.P.

Gain/Loss on Derivative Instruments

For the six months ended July 31,
2007, we incurred a non-cash loss of $843,242 as a result of the fair value
adjustment of outstanding derivative instruments. See Note 2 herein. For the
same period ended July 31, 2006, we did not incur any similar non-cash
expenses.

Software Sales, Support and Consulting

This segment of our business
consists of new sales and recurring monthly revenue for software products and
consulting products, and other related products including revenue from credit
bureau fees, supply sales, and forms programming. Our total software, consulting
and other sales during the six months ended July 31, 2007 decreased by $5,372
over the prior period ended July 31, 2006.

Due to the announcement that
effective at the end of the 2006 calendar year, we would no longer support one
of our DOS-based programs, all users of that program committed to the change to
our current product, and all of those installations were completed during the
period. We believe that our existing user base is remaining stable while new,
incremental software sales should continue to add customers for consulting
services. We believe the overall trend also indicates continuing growth of
recurring revenue.

Software sales provide
opportunities for us to introduce our consulting services to business clients.
While our software products facilitate data accumulation and reporting, our
consulting services help to interpret the 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.

We offer two levels of consulting
services targeted mainly to the dealer who provides self-funded, on-site auto
financing (Buy Here-Pay Here). The standard package includes unlimited manager
training, unlimited 800 number technical support, a monthly benchmarking
report of composite data from dealerships using our system, and one training
conference per year. The premier package also includes a weekly faxed
performance report based on download and analysis of the clients data. Our
consultants provide telephone consultation to discuss the report and provide
guidance on areas where improvements could be made. We also may provide
customized trend analysis on specialized issues. Also included in the premier
package are two or three on-site visits each year by our consultant. Each visit
includes a top-to-bottom audit of sales, operations, procedures, marketing
activities, inventories, computer systems and financial results.

Carbiz Auto Credit

The fastest growing segment of
our business continues to be our Carbiz Auto Credit specialty consumer finance
business. We operate three facilities in Florida called Carbiz Auto Credit,
that originate, underwrite, fund and

19

---

collect auto loans to customers with credit difficulties. The
scalable business model leverages our industry expertise and proprietary
underwriting and collection processes.

We believe that the results from
our Palmetto and St. Petersburg corporate locations and Tampa joint venture
location for the year ended January 31, 2007 have indicated a strong consumer
demand for the finance product in that market, as well as reinforce the
effectiveness of our system for operations, marketing, underwriting and
collections.

The increase in sales activity
during the six months ended July 31, 2007 was the result of an increase in
inventory levels at all three locations due to a increase in cash available for
the purchase of inventory after the closing and funding of the Trafalgar
Debenture and the Credit Facility.

As of the period-ended July 31,
2007, the total Carbiz Auto Credit loan portfolio was $610,776. The allowance
for doubtful accounts at the same date was $68,345. The allowance for doubtful
accounts is established through the allocation of 100% of any repossessions in
process plus 8% of the remaining portfolio balance. All loans are made at an
interest rate of 14.95% APR, 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 done on each
customer. While the range of scores varies widely, the average credit score of
our customers is approximately 500.

Liquidity and Capital Resources

As of January 31, 2007 and July
31, 2007, we had $67,990 and $91,284, respectively, in cash and cash
equivalents. During thesix months ended July 31, 2007, we decreased our
accounts payable and accrued liabilities by $716,557, which totaled $516,053 at
July 31, 2007. During the six months ended July 31, 2007, we made debt
repayments and capital lease payments totaling $449,732, which includes $215,990
paid to retire long term debt and $230,000 to retire short term debt to a
related party. We have continued to rely on private placements to meet our cash
flow requirements. Operationally, we have not generated the necessary revenue to
cover our operating expenses.

On February 28, 2007, we sold an
aggregate of $2,500,000 secured convertible debentures to an investor, of which
we have received $2,500,000 of gross proceeds as of the date of this report.

On March 23, 2007, we closed a
credit facility with Colossus Capital Fund, L.P. that has a maximum commitment
of $10 million and expires on March 23, 2011. The initial amount of the credit
facility is $5 million, of which $257,725 was borrowed at July 31, 2007. The
amount may be increased to $10 million at the option of Carbiz.

We used proceeds from the
borrowings primarily to finance our operating loss and expand our Carbiz Auto
Credit operations.

As of July 31, 2007, 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**
    
    
    One to Three
    
    
    Three to
    
    
    GreaterYear
    
    
    Years
    
    
    Five Years
    
    
    than Five
    
    
    TotalOperating Leases
    $
    195,370
    
    $
    214,131
    
    $
    384
    
    $
    -
    
    $
    409,885Capital Leases
    
    8,027
    
    
    6,617
    
    
    -
    
    
    -
    
    
    14,644Long-Term Debt
    
    625,000
    
    
    1,875,000
    
    
    -
    
    
    -
    
    
    2,500,000Interest (1)
    
    234,375
    
    
    109,369
    
    
    -
    
    
    -
    
    
    343,744$
    1,062,772
    
    $
    2,205,117
    
    $
    384
    
    $
    -
    
    $
    3,268,273


|(1) | Does not include our credit facility with Colossus
      Capital Fund, L.P. that has a maximum commitment of $10 million and
      expires on March 23, 2011. The initial amount of the credit facility is $5
      million. The amount may be increased to $10 million at the option of
      Carbiz. At July 31, 2007, we had total outstanding borrowings under the
      credit facility of $257,725.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Should our operating revenues
fail to increase to provide sufficient cash flow to fund operations, we may
require additional financing. Based on six month results and an assumption of
meeting business projections for the

20

---

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 untilJanuary 2008. 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.

Off-Balance Sheet Arrangements

As of July 31, 2007, we do not
have any off-balance sheet arrangements.

Item 3. 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 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.

21

---

PART II  OTHER INFORMATION

Item 1. Legal Proceedings

None.

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

None

Item 3. Defaults Upon Senior Securities

None.

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

Our Annual & Special Meeting of Shareholders was held at
  the Hyatt Sarasota at 1000 Boulevard of the Arts, Sarasota, Florida on June
  22, 2007 at 5:00 p.m. Our shareholders voted on three 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
      41,296,275
      -
      200Ross Quigley
      41,296,275
      -
      200Richard Lye
      41,296,275
      -
      200Theodore Popel
      41,296,275
      -
      200Stanton Heintz
      41,296,275
      -
      200Christopher Bradbury
      41,296,275
      -
      200Wallace Weylie
      41,296,275
      -
      200Vernon Haverstock
      41,296,275
      -
      200Gene Tomsic
      41,296,275
      -
      200Brandon Quigley
      41,296,275
      -
      200


|(2) | The appointment of Aidman, Piser & Company, 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-Votes41,296,275
      -
      200
      -


|(3) | To approve our stock option plan.
|--- | ---------------------------------

No. of Shares
      No. of Shares
      
      No. ofVoted For
      Voted Against
      No. of Abstentions
      Broker Non-Votes39,183,519
      50,366
      2,062,590
      -


Item 5. Other Information

None.

Item 6. Exhibits

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

| | 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

22

---

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 14, 2007 | /s/ Carl Ritter              
|                         | Carl Ritter                  
|                         | Chief Executive Officer      
|                         | (principal executive officer)

23

---