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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period endedOctober 31, 2008

OR

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

For the transition period from ________________ to
_______________

Commission file Number:000-52209

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

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

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

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

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

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

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

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

As of December 10, 2008, 87,807,889 common shares of the
Registrant were issued and outstanding.

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

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CARBIZ INC.

FORM 10-Q

For the Quarterly Period Ended October 31, 2008

INDEX

|PART
      I   | Financial
      Information                                                                 |   
|-------------- | ------------------------------------------------------------------------------------------- | --
|Item
      1.  | Financial
      Statements                                                                  | 1 
|Item
      2.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations | 19
|Item
      4.  | Controls
      and Procedures                                                               | 27
|               |                                                                                             |   
|PART
      II  | Other
      Information                                                                     |   
|Item
      1.  | Legal
      Proceedings                                                                     | 28
|Item
      1A. | Risk
      Factors                                                                          | 28
|Item
      2.  | Unregistered
      Sales of Equity Securities and Use of Proceeds                           | 28
|Item
      3.  | Defaults
      Upon Senior Securities                                                       | 29
|Item
      4.  | Submission
      of Matters to a Vote of Security Holders                                   | 29
|Item
      5.  | Other
      Information                                                                     | 29
|Item
      6.  | Exhibits                                                                                    | 29

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

---

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

|                                                                      |   | October 31, 2008 |   |   | January 31, 2008 |  
|--------------------------------------------------------------------- | - | ---------------- | - | - | ---------------- | -
|                                                                      |   | (unaudited)      |   |   |                  |  
|ASSETS                                                                |   |                  |   |   |                  |  
|CURRENT                                                               |   |                  |   |   |                  |  
|Cash and cash
      equivalents                                       | $ | 557,831          |   | $ | 1,141,271        |  
|Accounts receivable                                                   |   | 54,009           |   |   | 84,916           |  
|Current portion of
      notes receivable, net                        |   | 15,072,457       |   |   | 16,389,259       |  
|Inventory                                                             |   | 3,666,830        |   |   | 2,554,836        |  
|Prepaids and other
      assets                                       |   | 375,259          |   |   | 465,500          |  
|Deferred costs                                                        |   | -                |   |   | 3,707            |  
|                                                                      |   | 19,726,386       |   |   | 20,639,489       |  
|NOTES RECEIVABLE, NET LESS CURRENT PORTION                            |   | 11,132,407       |   |   | 8,649,284        |  
|DEFERRED FINANCING COSTS                                              |   | 710,111          |   |   | 1,362,593        |  
|PROPERTY AND EQUIPMENT                                                |   | 880,789          |   |   | 767,995          |  
|GOODWILL                                                              |   | 438,283          |   |   | 438,283          |  
|                                                                      | $ | 32,887,976       |   | $ | 31,857,644       |  
|                                                                      |   |                  |   |   |                  |  
|LIABILITIES                                                           |   |                  |   |   |                  |  
|CURRENT                                                               |   |                  |   |   |                  |  
|Accounts payable and accrued
      liabilities                        | $ | 3,463,075        |   | $ | 3,078,560        |  
|Note payable, related
      party                                     |   | 200,000          |   |   | 200,000          |  
|Current portion of long-term debt:                                    |   |                  |   |   |                  |  
|Lines of credit                                                       |   | 36,691,174       |   |   | 17,580,169       |  
|Inventory floor
      plan                                            |   | 4,596,590        |   |   | 1,421,151        |  
|Current portion of
      capital leases                               |   | 4,491            |   |   | 8,104            |  
|Current portion of convertible
      debentures                       |   | 1,455,094        |   |   | 435,597          |  
|Derivative liabilities                                                |   | 6,319,435        |   |   | 8,844,036        |  
|Deferred revenue                                                      |   | 3,230            |   |   | 59,753           |  
|                                                                      |   | 52,733,089       |   |   | 31,627,370       |  
|                                                                      |   |                  |   |   |                  |  
|CAPITAL LEASES, NET OF CURRENT PORTION                                |   | -                |   |   | 2,621            |  
|CONVERTIBLE DEBENTURE, LESS CURRENT PORTION                           |   | 8,103            |   |   | 312,405          |  
|Includes $8,103 and $25,093 respectively to related parties           |   |                  |   |   |                  |  
|LONG-TERM DEBT, LESS CURRENT PORTION                                  |   | -                |   |   | 17,423,298       |  
|                                                                      |   | 52,741,192       |   |   | 49,365,694       |  
|                                                                      |   |                  |   |   |                  |  
|COMMITMENTS AND CONTINGENCIES (Note 12)                               |   | -                |   |   | -                |  
|                                                                      |   |                  |   |   |                  |  
|STOCKHOLDERS' DEFICIENCY                                              |   |                  |   |   |                  |  
|COMMON SHARES                                                         |   | 18,056,059       |   |   | 16,274,119       |  
|Unlimited shares authorized, 85,087,889 and 64,870,681 common shares  |   |                  |   |   |                  |  
|issued and
      outstanding at October 31, 2008 and January 31, 2008 |   |                  |   |   |                  |  
|ADDITIONAL PAID-IN CAPITAL                                            |   | 7,807,638        |   |   | 7,679,205        |  
|ACCUMULATED OTHER COMPREHENSIVE LOSS                                  |   | (385,197         | ) |   | (385,197         | )
|ACCUMULATED DEFICIT                                                   |   | (45,331,716      | ) |   | (41,076,177      | )
|                                                                      |   | (19,853,216      | ) |   | (17,508,050      | )
|                                                                      | $ | 32,887,976       |   | $ | 31,857,644       |  

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

1

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

|                                                |   | For the three months ended |   |   | For the nine months ended |  
|----------------------------------------------- | - | -------------------------- | - | - | ------------------------- | -
|                                                |   | October
      31,          |   |   | October
      31,         |  
|                                                |   | 2008                       |   |   | 2007                      |  
|SALES                                           |   |                            |   |   |                           |  
|Used car sales                                  | $ | 12,303,021                 |   | $ | 252,830                   |  
|Software and consulting services (Note
      9) |   | 112,449                    |   |   | 575,533                   |  
|Interest income                                 |   | 1,467,773                  |   |   | 579,191                   |  
|                                                |   | 13,883,243                 |   |   | 1,407,554                 |  
|COST OF SALES                                   |   |                            |   |   |                           |  
|Used car sales                                  |   | 8,139,743                  |   |   | 532,880                   |  
|Software and consulting
      services          |   | 164,107                    |   |   | 301,297                   |  
|                                                |   | 8,303,850                  |   |   | 834,177                   |  
|GROSS PROFIT                                    |   | 5,579,393                  |   |   | 573,377                   |  
|                                                |   |                            |   |   |                           |  
|(Gain) loss on debt foregiveness                |   | -                          |   |   | -                         |  
|Personnel expenses                              |   | 640,276                    |   |   | 366,133                   |  
|Selling expenses                                |   | 272,307                    |   |   | 98,061                    |  
|Professional fees                               |   | 142,221                    |   |   | 211,431                   |  
|Provision for credit losses                     |   | 4,729,559                  |   |   | 10,585                    |  
|Other operating expenses                        |   | 1,075,658                  |   |   | 981,954                   |  
|                                                |   | 6,860,021                  |   |   | 1,668,164                 |  
|OPERATING LOSS                                  |   | (1,280,628                 | ) |   | (1,094,787                | )
|                                                |   |                            |   |   |                           |  
|INTEREST AND OTHER EXPENSES                     |   | (3,037,922                 | ) |   | (595,542                  | )
|GAIN (LOSS) ON DERIVATIVE LIABILITIES           |   | (287,417                   | ) |   | (656,350                  | )
|LOSS ON EXTINGUISHMENT OF DEBT (Note 4)         |   | (1,205,720                 | ) |   |                           |  
|GAIN ON SALE OF SOFTWARE DIVISION               |   | -                          |   |   | -                         |  
|WRITE-OFF OF DEFERRED FINANCING COSTS           |   |                            |   |   | (409,533                  | )
|MINORITY INTEREST IN LOSSES                     |   | -                          |   |   | 10,687                    |  
|NET LOSS FOR THE PERIOD                         | $ | (5,811,687                 | ) | $ | (2,745,525                | )
|LOSS PER SHARE:                                 |   |                            |   |   |                           |  
|Basic                                           | $ | (0.08                      | ) | $ | (0.04                     | )
|Diluted                                         | $ | (0.08                      | ) | $ | (0.04                     | )
|WEIGHTED AVERAGE NUMBER OF COMMON               |   |                            |   |   |                           |  
|SHARES OUTSTANDING (Basic)                      |   | 74,737,369                 |   |   | 61,464,634                |  
|WEIGHTED AVERAGE NUMBER OF COMMON               |   |                            |   |   |                           |  
|SHARES OUTSTANDING (Diluted)                    |   | 74,737,369                 |   |   | 61,464,634                |  

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

2

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

|                                                                         |   | For the Nine Months Ended |  
|------------------------------------------------------------------------ | - | ------------------------- | -
|                                                                         |   | October 31, 2008          |  
|NET INFLOW (OUTFLOW) OF CASH RELATED                                     |   |                           |  
|TO THE FOLLOWING ACTIVITIES:                                             |   |                           |  
|OPERATING ACTIVITIES                                                     |   |                           |  
|Net loss                                                                 | $ | (4,255,539                | )
|Items not affecting cash:                                                |   |                           |  
|Depreciation
      of property and equipment                             |   | 107,511                   |  
|Minority
      interest in losses                                        |   | -                         |  
|(Gain) loss
      on derivative liabilities                              |   | (3,758,246                | )
|(Gain)
      loss on extinguishment of debt                              |   | 1,205,720                 |  
|Gain on sale
      of software operations                                |   | (2,514,229                | )
|Write
      - off of deferred financing costs                            |   | -                         |  
|Amortization
      of deferred financing costs                           |   | 442,306                   |  
|Amortization
      of debt discount                                      |   | 2,544,482                 |  
|Share-based
      compensation                                           |   | 263,959                   |  
|Provision
      for bad debts                                            |   | 8,863,710                 |  
|Net changes in operating assets and liabilities:                         |   |                           |  
|Accounts
      receivable                                                |   | (27,905                   | )
|Notes receivable                                                         |   | (9,992,240                | )
|Prepaids
      and other assets                                          |   | 63,573                    |  
|Inventory                                                                |   | (1,111,994                | )
|Deferred
      costs                                                     |   | 2,490                     |  
|Accounts payable
      and accrued liabilities                           |   | 330,985                   |  
|Deferred
      revenue                                                   |   | (48,409                   | )
|NET CASH FLOWS FROM OPERATING ACTIVITIES                                 |   | (7,883,826                | )
|INVESTING ACTIVITIES                                                     |   |                           |  
|Proceeds from sale of software operations                                |   | 2,500,000                 |  
|Acquisition of Calcars
      assets                                      |   | -                         |  
|Acquisition of property and equipment                                    |   | (238,328                  | )
|NET CASH FLOW FROM INVESTING
      ACTIVITIES                            |   | 2,261,672                 |  
|FINANCING ACTIVITIES                                                     |   |                           |  
|Proceeds from term loan
      financing                                  |   | -                         |  
|Repayment of capital leases                                              |   | (6,234                    | )
|Proceeds from credit facilites,
      net                                |   | 4,863,147                 |  
|Repayment of convertible debentures                                      |   | -                         |  
|Repayment of related party
      debt                                    |   | -                         |  
|Proceeds from Trafalgar debenture, including
      derivative components |   | -                         |  
|Proceeds from exercise
      of warrants                                 |   | 182,149                   |  
|Payment of deferred financing costs                                      |   | -                         |  
|NET CASH FLOWS FROM FINANCING
      ACTIVITIES                           |   | 5,039,062                 |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                  |   |                           |  
|AND CASH EQUIVALENTS                                                     |   | (348                      | )
|INCREASE (DECREASE) IN CASH AND                                          |   |                           |  
|CASH EQUIVALENTS                                                         |   | (583,440                  | )
|CASH AND CASH EQUIVALENTS,                                               |   |                           |  
|BEGINNING OF PERIOD                                                      |   | 1,141,271                 |  
|CASH AND CASH EQUIVALENTS,                                               |   |                           |  
|END OF PERIOD                                                            | $ | 557,831                   |  

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

3

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

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | 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 October 31, 2008
      and 2007 condensed consolidated financial statements, which are necessary
      for a fair financial statement presentation. The results for the three and
      nine months ended October 31, 2008 and 2007 are not necessarily indicative
      of financial operations for the full year. These financial statements are
      consolidated and condensed. For further information, refer to the consolidated
      financial statements and footnotes in the Companys audited financial
      statements for the year ended January 31, 2008 which are included in the
      Companys Form 10-KSB filed with the U.S. Securities and Exchange
      Commission (the SEC) on April 30, 2008 (January 31, 2008 Form 10-KSB).
      The year-end condensed consolidated balance sheet data was derived from
      audited financial statements, but does not include all disclosures
      required by accounting principles generally accepted in the United States
      of America.                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | References to the Company typically include the Companys
      consolidated subsidiaries and Carbiz Auto Credit JV1, LLC, a Florida
      limited liability company (JV1), which was a joint venture in which the
      Company owned a 50% interest until January 24, 2008, at which time it
      purchased the 50% percent portion of JV1 that it did not own. The
      Companys operations are principally conducted through its five operating
      subsidiaries, Carbiz USA, Inc., a Delaware corporation, Carbiz Auto
      Credit, Inc. (CAC), Carbiz Auto Credit, AQ Inc. (AQ), Texas Auto
      Credit, Inc. (Texas Auto) (CAC, AQ and Texas Auto are all Florida
      corporations) and JV1. Collectively, Carbiz Inc., Carbiz USA, Inc., CAC ,
      AQ, Texas Auto, and JV1 are referred to herein as Carbiz or the
      Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company is in the business of selling and financing
      used automobiles. Until recently it was also developing, marketing,
      distributing and supporting software and Internet products for the
      automotive sales finance industry. During the three and nine months ended
      October 31, 2008, the Company operated 26 dealerships which sell and
      finance used automobiles. Included in the 26 are 23 locations acquired on
      October 1, 2007 throughout the Midwest in Illinois, Indiana, Iowa,
      Kentucky, Nebraska, Ohio and Oklahoma in addition to the two dealerships
      it operates in Florida and one in Texas. The Company began operation of
      its Texas location on December 24, 2007 with the purchase of a portfolio
      of used automobile and light truck loans, and an inventory of used
      automobiles and light trucks located in Houston, Texas. Sales operations
      for the Texas location were not authorized by the State of Texas until
      March 28, 2008. On January 24, 2008 the Company purchased the remaining
      50% share of Carbiz Auto Credit JV1 that it did not previously own. On
      July 2, 2008 the Company sold certain assets and liabilities related to
      the software operation that were used in the development, marketing,
      distribution and support of software and Internet products for the
      automotive sales finance industry. It did retain its automotive consulting
      business.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | While these condensed consolidated financial statements
      have been prepared on the basis of accounting principles applicable to a
      going concern, several adverse conditions and events cast substantial
      doubt upon the validity of this assumption.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company has incurred losses and generated significant
      negative operating cash flows in the current periods (exclusive of gains
      on derivative instruments and the sale of the software operations in 2008)
      and in each of the past several years. The Company had a working capital
      deficiency of $33,006,703 at October 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

4

---

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

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Since the addition of the Mid-west and Houston locations,
      the Companys monthly revenue rates have increased substantially. Used car
      sales revenue for the three months ended October 31, 2008 was $12.3
      million. However, even with the increased revenue the Companys ability to
      continue its operations is dependent upon its ability to achieve
      profitable operations and to obtain financing to replace the Companys
      credit facilities with SWC Services, LLC (SWC) since SWC is unable to
      continue to fund the Companys operations due to bankruptcy of SWC on
      October 20, 2008. The Company has ceased depositing into bank accounts
      controlled by SWC the proceeds from the sale of automobiles and monies
      received from customers who have financed the purchase of their vehicles
      through loans from the Company, as required under the SWC loan
      agreement.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company and SWCs bankruptcy trustee are negotiating
      regarding the control of funds received by the Company and the terms under
      which SWC and the Company will terminate the credit facilities and pay off
      the outstanding indebtedness.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In the event that the SWC trustee attempts to foreclose
      on the collateral pledged under the SWC Loan Agreement, the Company
      intends to challenge such foreclosure through all appropriate means. There
      can be no assurance of the likelihood of success to such challenge. At
      October 31, 2008, there was a total balance of $41,287,764 borrowed under
      the SWC credit facilities, and substantially all of the Companys assets
      are pledged as collateral on this indebtedness.                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company is presently discussing various financing
      alternatives with a number of sources. However, the recent worldwide
      financial and credit crises have strained investor liquidity and
      contracted credit markets, which will likely make the cost of raising
      funds through the debt or equity markets more expensive or make those
      markets unavailable. The Company believes that if it is able to obtain
      financing that the additional locations combined with its existing
      consulting businesses will improve its operating cash flows going forward.
      However, there can be no assurance that financing efforts will be
      successful and, if it does obtain financing, that the Company will achieve
      profitable operations. The Company will not be able to continue its
      operations if it is unable to obtain new financing.                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | If the going concern assumptions were not appropriate to
      these condensed consolidated financial statements, then adjustments would
      be necessary in the carrying values of assets and liabilities, the
      reported net income and the balance sheet classifications used.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The condensed consolidated financial statements included
      in the Quarterly Report do not include any adjustment that may arise as a
      result of these uncertainties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | (c)          
        Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | These condensed consolidated financial statements have
      been prepared in accordance with accounting principles generally accepted
      in the United States of America (GAAP) and reflect the following
      significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Accounts and notes receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Accounts and notes receivable shown are net of bad debt
      provisions. The amount includes short term notes received through the sale
      of used automobiles. The notes are for terms ranging from 80 weeks to 48
      months and some require weekly payments. Interest is calculated weekly
      based on the balance outstanding at the time. The allowance for doubtful
      accounts reflects the Companys best estimate of probable losses inherent
      in the accounts and notes receivable balances. The Company determines the
      allowance based on known troubled accounts, historical experience, and
      other currently available evidence.                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company takes steps to repossess a vehicle when the
      customer becomes severely delinquent in his or her payments, and
      management determines that timely collection of future payments is not
      probable. Accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

5

---

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

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | are charged off after the expiration of a statutory
      notice period for repossessed accounts, or when management determines that
      the timely collection of future payments is not probable for accounts
      where the Company has been unable to repossess the automobile.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | For accounts where the automobile was repossessed, the
      fair value of the repossessed automobile is treated as a reduction of the
      gross finance receivable balance written-off. On average, accounts are
      approximately 90 days past due at the time of write-off. For previously
      written-off accounts that are subsequently recovered, the amount of such
      recovery is credited to the allowance for credit losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company maintains an allowance for credit losses on
      an aggregate basis at a level it considers sufficient to cover estimated
      losses in the collection of its finance receivables. The allowance for
      credit losses is based primarily upon historical credit loss experience,
      with consideration given to recent credit loss trends and changes in loan
      characteristics (i.e., average amount financed and term), delinquency
      levels, collateral values, economic conditions and underwriting and
      collection practices. The allowance for credit losses is periodically
      reviewed by management with any changes reflected in current operations.
      Although, it is at least reasonably possible that events or circumstances
      could occur in the future that are not presently foreseen which could
      cause actual credit losses to be materially different from the recorded
      allowance for credit losses, the Company believes that it has given
      appropriate consideration to all relevant factors and has made reasonable
      assumptions in determining the allowance for credit losses.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Inventory consists of used vehicles and is related to the
      CAC, AQ, and Texas Auto operations. Inventory is stated at the lower of
      cost or net realizable value. Cost is determined on a specific item
      basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Deferred finance costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Deferred finance costs include fees paid in conjunction
      with the issuance of convertible debentures and entering into term loans,
      lines of credit, and inventory floor plans and are amortized over the term
      of the related financial instruments. Approximate future amortization of
      deferred financing costs is as follows as of October 31,
  2008:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Periods ending October 312009
    $
    267,2792010
    
    233,3332011
    
    209,499$
    710,111


6

---

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

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

| |                                                         |   | Three
      Months Ended October 31 |   |   | Nine
      Months Ended October 31 |  
| | ------------------------------------------------------- | - | ----------------------------------- | - | - | ---------------------------------- | -
| |                                                         |   | 2008                                |   |   | 2007                               |  
| | Loss attributable to common stockholder-(numerator)     | $ | (5,811,687                          | ) | $ | (2,745,525                         | )
| | Basic:                                                  |   |                                     |   |   |                                    |  
| | Weighted average shares outstanding
      (denominator) |   | 74,737,369                          |   |   | 61,464,634                         |  
| | Loss per common share - basic                           | $ | (0.08                               | ) | $ | (0.04                              | )
| | Diluted:                                                |   |                                     |   |   |                                    |  
| | Weighted average shares outstanding - basic             |   | 74,737,369                          |   |   | 61,464,634                         |  
| | Effect of dilutive securities                           |   | -                                   |   |   | -                                  |  
| | Adjusted weighted average share (denominator)           |   | 74,737,369                          |   |   | 61,464,634                         |  
| | Loss per common share (diluted)                         | $ | (0.08                               | ) | $ | (0.04                              | )

The effects of 8,438,041 stock options,
5,841,664 warrants and 139,704,518 shares indexed to the derivative liabilities
outstanding have been excluded from Common Stock equivalents because their
effect would be anti-dilutive.

Share-based compensation

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

As of October 31, 2008, there were
8,438,041 stock options outstanding and 3,958,041 stock options vested. No stock
options were granted during the nine months ended October 31, 2008.

During the nine months ended October
31, 2008, the Company recognized share-based compensation expense of $63,891 for
stock options previously granted to employees, $39,000 for incentive stock
granted to employees and $64,168 of expense for stock previously granted to
consultants for services rendered under a contract with a term which required
the amortization of the total expense.

On January 25, 2007, the Company
awarded 3,400,000 common shares as restricted stock to certain directors,
officers, and key employees of the Company of which 680,000 shares have been
vested as of October 31, 2008. During the nine months October 31, 2008 the
Company recognized share-based compensation expense of $96,900 as a result of
this restricted stock grant.

7

---

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

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                 
|   | As of October 31, 2008, the weighted average exercise
      price and weighted average lives of stock options were as
  follows:

| |                |  |           |  |  |             |  |  | Outstanding
      Options | 
| | -------------- |  | --------- |  |  | ----------- |  |  | ------------------------- | 
| |                |  | Vested    |  |  | Outstanding |  |  | Weighted                  | 
| |                |  | Options   |  |  | Options     |  |  | Average Life (Yrs)        | 
| | 1998 Plan    * |  | 2,838,041 |  |  | 2,838,041   |  |  | 0.5                       | 
| | 2007 Plan      |  | 1,120,000 |  |  | 5,600,000   |  |  | 3.2                       | 
| | Total          |  | 3,958,041 |  |  | 8,438,041   |  |  |                           | 

(*) This series of options were denominated
  in Canadian dollars. For purpose of this schedule the exercise prices have been
  converted into U.S. dollars based on the foreign exchange rate as of October
  31, 2008.

The market value of the Companys
common stock at October 31, 2008 was $0.06; therefore there was no intrinsic
value of all options outstanding and vested at October 31, 2008. In addition,
non-vested options to purchase 4,480,000 shares were outstanding at October 31,
2008 with a weighted average exercise price of $0.13 per share and a weighted
average life of 3.2 years. The Company will record $324,424 of additional
compensation expense during the subsequent 3 years for non-vested options
outstanding as of October 31, 2008.

Fair value of financial assets and
liabilities

The Company measures the fair value of
financial assets and liabilities based on guidance of Financial Accounting
Standards No. 157, Fair Value Measurements (FAS 157) which defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements.

Effective February 1, 2008, the Company
adopted the provisions of FAS 157 for financial assets and liabilities, as well
as for any other assets and liabilities that are carried at fair value on a
recurring basis. The adoption of the provisions of Statement No. 157 related to
financial assets and liabilities and other assets and liabilities that are
carried at fair value on a recurring basis did not materially impact the
Companys consolidated financial position and results of operations. FAS 157
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Statement No. 157 also establishes
a fair value hierarchy, which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. Statement No. 157 describes three levels of inputs that may be used
to measure fair value:

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

The following table summarizes
liabilities measured at fair value on a recurring basis at October 31, 2008:

| |                        |   | Fair
      Value Measurements Using | 
| | ---------------------- | - | ----------------------------------- | 
| |                        |   | Level 1                             | 
| | Liabilities            |   |                                     | 
| | Derivative liabilities | $ | --                                  | 

Recent accounting pronouncements

In March 2008, the FASB issued
Financial Accounting Standard No. 161, Disclosures about Derivative
Instruments and Hedging Activities(FAS 161). This statement requires
companies to provide enhanced disclosures about (a) how and why they use
derivative instruments, (b) how derivative instruments and related

8

---

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

|1. | DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | hedged items are accounted for under FAS 133 and its
      related interpretations, and (c) how derivative instruments and related
      hedged items affect a companys financial position, financial performance,
      and cash flows. FAS 161 is effective for financial statements for fiscal
      years and interim periods beginning after November 15, 2008. The Company
      will adopt the new disclosure requirements on or before the required
      effective date and thus will provide additional disclosures in its
      consolidated financial statements when adopted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | In April 2008, FASB Staff Position No. 142-3,
      Determination of the Useful Life of Intangible Assets (FSP 142-3) was
      issued. This standard amends the factors that should be considered in
      developing renewal or extension assumptions used to determine the useful
      life of a recognized intangible asset under FASB Statement No. 142,
      Goodwill and Other Intangible Assets. FSP 142-3 is effective for financial
      statements issued for fiscal years beginning after December 15, 2008, and
      interim periods within those fiscal years. Early adoption is prohibited.
      The Company does not expect the adoption of FSP 142-3 to have a material
      effect on its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | In May 2008, the FASB issued Financial Accounting
      Standard No. 162, The Hierarchy of Generally Accepted Accounting
      Principles(FAS 162),. This standard is intended to improve
      financial reporting by identifying a consistent framework, or hierarchy,
      for selecting accounting principles to be used in preparing financial
      statements that are presented in conformity with generally accepted
      accounting principles in the United States for non-governmental entities.
      FAS 162 is effective 60 days following approval by the U.S. Securities and
      Exchange Commission (SEC) of the Public Company Accounting Oversight
      Boards amendments to AU Section 411, The Meaning of Present Fairly in
      Conformity with Generally Accepted Accounting Principles. The Company
      does not expect SFAS No. 162 to have a material impact on the preparation
      of the consolidated financial statements.                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | In May 2008, the Financial Accounting Standards Board
      (FASB) affirmed the consensus of FASB Staff Position APB 14-1 (FSP APB
      14-1), Accounting for Convertible Debt Instruments That May Be Settled in
      Cash upon Conversion (Including Partial Cash Settlement), which applies
      to all convertible debt instruments that have a net settlement feature,
      which means that such convertible debt instruments, by their terms, may be
      settled either wholly or partially in cash upon conversion. FSP APB 14-1
      requires issuers of convertible debt instruments that may be settled
      wholly or partially in cash upon conversion to separately account for the
      liability and equity components in a manner reflective of the issuers
      nonconvertible debt borrowing rate. FSP APB 14-1 is effective for
      financial statements issued for fiscal years beginning after December 15,
      2008 and interim periods within those fiscal years. Early adoption is not
      permitted and retroactive application to all periods presented is
      required. The Company is currently evaluating the impact on its financial
      statements of this accounting standard.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | In February 2008, the FASB issued FASB Staff Position
      157-2, which provides for a one-year deferral of the provisions of
      Statement No. 157 for non-financial assets and liabilities that are
      recognized or disclosed at fair value in the consolidated financial
      statements on a non-recurring basis. The application of FAS 157 to non-
      financial assets and liabilities is effective for fiscal years beginning
      after November 15, 2008. The Company is currently evaluating the impact of
      adopting the provisions of Statement No. 157 for non-financial assets and
      liabilities that are recognized or disclosed on a non-recurring
    basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

9

---

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

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

| |                                                     |  |            |  |   | October 31, 2008 | 
| | --------------------------------------------------- |  | ---------- |  | - | ---------------- | 
| | Trade receivables from software &
      consulting  |  |            |  | $ | 55,207           | 
| | Less: Allowance
      for doubtful accounts         |  |            |  |   | 1,198            | 
| |                                                     |  |            |  |   | 54,009           | 
| | Notes receivable from vehicle sales  Florida       |  |            |  |   | 748,081          | 
| | Less: Allowance for doubtful accounts               |  |            |  |   | 148,745          | 
| |                                                     |  |            |  |   | 599,336          | 
| | Notes receivable from vehicle sales 
      Midwest |  |            |  |   | 23,841,292       | 
| | Less: Allowance
      for doubtful accounts         |  |            |  |   | 4,740,383        | 
| |                                                     |  |            |  |   | 19,100,909       | 
| | Notes receivable from vehicle sales  Texas Auto    |  |            |  |   | 9,112,058        | 
| | Less: Allowance for doubtful accounts               |  |            |  |   | 2,607,439        | 
| |                                                     |  |            |  |   | 6,504,619        | 
| | Long-term portion of notes receivable               |  | Florida    |  |   | 239,734          | 
| |                                                     |  | Midwest    |  |   | 7,640,364        | 
| |                                                     |  | Texas Auto |  |   | 3,252,309        | 
| |                                                     |  | Total      |  | $ | 11,132,407       | 
| | Current portion of notes receivable                 |  | Florida    |  |   | 359,602          | 
| |                                                     |  | Midwest    |  |   | 11,460,545       | 
| |                                                     |  | Texas Auto |  |   | 3,252,310        | 
| |                                                     |  | Total      |  | $ | 15,072,457       | 

The future maturities of the long-term
portion of the notes receivable for the subsequent periods ending October 31,
2010 through 2012 are $7,201,678 in fiscal year 2010, $3,406,632 in fiscal year
2011, and $524,097 in fiscal year 2012.

During the nine month periods ended
October 31, 2008, and 2007, the Company earned $4,776,903 and $620,188,
respectively, of financing income on the notes receivable. This amount has been
included as interest income within Revenues in these condensed consolidated
financial statements.

10

---

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

|2. | ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE
      (continued)                                                                                          
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                     
|   | A comparison of the following classifications of notes
      receivable related to auto sales at October 31, 2008 and 2007 is presented
      below:

| | Florida stores portfolio:               |   | October
      31,      | 
| | --------------------------------------- | - | ---------------------- | 
| |                                         |   | 2008                   | 
| |                                         |   | Amount                 | 
| | Active accounts                         | $ | 733,564                | 
| | Accounts held in repossession           | $ | 14,517                 | 
| | Accounts written off during nine months | $ | 180,693                | 
| | Midwest stores portfolio                |   | October
      31, 2008 | 
| |                                         |   | Amount                 | 
| | Active accounts                         | $ | 23,188,742             | 
| | Accounts held in repossession           | $ | 652,550                | 
| | Accounts written off during nine months | $ | 5,891,490              | 
| | Texas portfolio:                        |   | October 31, 2008       | 
| |                                         |   | Amount                 | 
| | Active accounts                         | $ | 8,152,326              | 
| | Accounts held in repossession           | $ | 959,732                | 
| | Accounts written off during nine months | $ | 2,782,247              | 

Activity in the allowance for doubtful
accounts for the nine month periods ended October 31, 2008 and 2007 is as
follows:

| |                             |   | 2008     |  
| | --------------------------- | - | -------- | -
| |                             |   | Software |  
| | Balance at February 1, 2008 | $ | 8,543    |  
| | Charged to Expenses         |   | (3,612   | )
| | Write-offs and Other        |   | 486      |  
| | Balance at April 30         |   | 5,417    |  
| | Charged to Expenses         |   | 69,215   |  
| | Write-offs and Other        |   | (72,426  | )
| | Balance at July 31          |   | 2,206    |  
| | Charged to Expenses         |   | 2,899    |  
| | Write-offs and Other        |   | (3,907   | )
| | Balance at October 31       | $ | 1,198    |  

|3. | LONG-TERM DEBT                                                       
|-- | ---------------------------------------------------------------------
|   |                                                                      
|   | Long-tem debt consists of the following as of October 31,
      2008:

Revolving line of credit
    $
    14,087,593Term line of credit
    
    22,603,581Floor plan note payable
    
    4,596,590$
    41,287,764


The total debt above has been
classified as a current liability on the Balance Sheet as a result of the SWC
bankruptcy and the Company’s decision to suspend depositing loan collections in bank accounts controlled by SWC as required under the loan agreement. See Note 1(b).

11

---

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

|4. | CONVERTIBLE DEBENTURES                                                       
|-- | -----------------------------------------------------------------------------
|   |                                                                              
|   | Convertible debentures consist of the following as of
      October 31, 2008:

Convertible debentures, at face valueMaturing February 27, 2009
    $
    936,400Maturing September 30, 2009
    
    4,904,042Maturing December 1, 2010
    
    97,0005,937,442Less: unamortized discount
    
    (4,474,245
    )$
    1,463,197Current
    $
    1,455,094Long-term
    
    8,103$
    1,463,197


On September 15, 2008, the Company
entered into a debenture modification agreement with Trafalgar Capital
Specialized Investment Fund, Luxembourg (Trafalgar), which modified the
principal and interest payment schedules and effective interest rates for
certain of the outstanding Secured Convertible Debentures issued by the Company
to Trafalgar. Included are the following Secured Convertible Debentures:
$750,000 Secured Convertible Debenture issued on April 13, 2007 and $750,000
Secured Convertible Debenture issued on June 26, 2007, each of which was issued
pursuant to the Securities Purchase Agreement dated February 28, 2007;
$1,000,000 Secured Convertible Debenture issued on August 31, 2007 pursuant to
the Securities Purchase Agreement dated August 31, 2007; and $1,500,000 Secured
Convertible Debenture issued on September 26, 2007 pursuant to the Securities
Purchase Agreement dated September 26, 2007. The agreement does not affect the
$1,000,000 Secured Convertible Debenture issued on February 28, 2007. The
Company is required to pay to Trafalgar $40,000 in interest per month for 12
months beginning September 2008 for the Trafalgar Debentures on the outstanding
balance of $4,904,042. The balance of the unpaid Interest will be accrued over
the 12 months. The revision extended the maturity date for all principal
payments on these debentures to September 30, 2009. The August 31, 2007
Debenture in the amount of $1,000,000 will not be payable during the 12 months
unless the Company elects to pay it.

Although the contractual interest rates
of 8%, 10% and 11% were not revised pursuant to this agreement, the modified
terms of the debentures include additional interest payments of amounts which
provide for an internal rate of return to Trafalgar of at least 20% on the above
modified Trafalgar Debentures over their outstanding term. The additional
interest payments are due upon maturity of the debentures.

Pursuant to the modification agreement,
on September 15, 2008, the Company issued 2,500,000 shares of the Companys
common stock to Trafalgar in exchange for the cancellation of the 6.5 million
outstanding warrants to purchase the common stock of the Company previously held
by Trafalgar. In addition, the Company issued 4,000,000 shares to Trafalgar as a
forbearance fee for delay of payments due under the Senior Convertible
Debentures.

The Company accounted for the
modifications to the debentures based on the provisions of EITF 96-19,
Debtors Accounting for Modification or Exchange of Debt Instruments
which establishes the criteria to determine if substantial modifications of the
terms of the debt instruments have occurred. The revisions to the terms of
certain of the outstanding debentures were considered substantial, as defined,
and therefore, for accounting purposes the debentures have been accounted for as
debt extinguishments and the revised debentures recorded at fair value on the
date of execution of the agreement. The Company recorded a loss on
extinguishment of debt of $1,205,720, as a result of these transactions for the
three and nine months ended October 31, 2008.

See Note 6 for conversions of debentures to common stock.

12

---

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

|4. | CONVERTIBLE DEBENTURES (continued)                 
|-- | ---------------------------------------------------
|   |                                                    
|   | The modified debentures were recorded as
  follows:

Face value of debentures maturing September 30, 2009:8% Convertible debenture
    $
    964,5388%
      Convertible debenture
    
    944,19510% Convertible debenture
    
    1,178,12711%
      Convertible debenture
    
    1,817,1824,904,042Less: Discount for derivative liabilities
    
    (4,026,276
    )Less: Fair value adjustment
    
    (213,428
    )$
    664,338


|5. | LIQUIDATED DAMAGES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Trafalgar financings include registration rights
      agreements which, under certain circumstances, include provisions that
      require the Company to pay liquidated damages, in the event effective
      registrations are not in place on a timely basis for the underlying shares
      in the Trafalgar transactions. The Company originally filed a Registration
      Statement on Form SB-2 on April 17, 2007. Such registration was updated
      and amended several times until it was approved and declared effective on
      March 24, 2008 as an amended SB-2 on Form F- 3. On November 21, 2007, the
      Company was invoiced by Trafalgar for a total of $165,184 of liquidated
      damages. The Company was further invoiced an additional $54,192 on
      February 13, 2008. Both amounts ($219,376) were recorded as interest
      expense during the year ended January 31, 2008. Since the registration
      rights agreements call for liquidated damages up to 15%, a remaining
      contingent liability of $155,624 remains under the $2,500,000 Trafalgar
      financing. In addition, the $1,000,000 September 10, 2007 and $1,500,000
      September 26, 2007 Trafalgar financings have similar registration rights
      provisions (limited to 15%) with contingent liquidated damage obligations
      of $150,000 and $225,000, respectively. The Form F-3 filing declared
      effective on March 24, 2008, included the maximum number for shares
      underlying both the convertible debentures and warrants held by Trafalgar
      as allowed under SEC Rule 415. No additional invoices for liquidated
      damages have been received and the Company believes that no additional
      expense will be incurred as the registration statement requirements for
      filing have been fulfilled. On September 15, 2008 the Company entered into
      an agreement with Trafalgar which revised certain terms of the financings.
      See Note 4.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|6. | COMMON STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | (a)          
        Conversion of Trafalgar convertible debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | During the nine months ended October 31, 2008, the
      Company issued 597,868 shares of common stock at conversion prices ranging
      from $0.136 to $0.1488 in a series of Trafalgar Convertible Debenture
      conversions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | (b)           Conversion
        of October 1, 2007 related party convertible debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | On September 12, September 22, and October 3, 2008,
      holders of certain of the Companys October 1, 2007 convertible debentures
      converted an aggregate of $703,000 of principal and $78,375 of accrued
      interest due under the debentures into 11,432,792 shares of common stock
      of the Company. Conversion prices ranged from $0.051 to $0.085. All such
      holders are members of the board of directors or senior management of the
      Company or members of their immediate families.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

13

---

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

|6. | COMMON STOCK (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On September 4, 2008, 1,189,882 shares of common stock
      were issued upon exercise of outstanding warrants issued as part of the
      previously reported September 5, 2006 sale of unregistered securities. The
      Company received proceeds of $178,483 based on the $0.15 warrant exercise
      price. The balance of the common share warrants (2,775,582) expired
      unexercised on September 5, 2008.                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On October 3, 2008, the Company issued 66,666 shares of
      common stock upon exercise of two warrants issued as part of the October
      1, 2007 convertible debenture financing. The Company received proceeds of
      $3,666 at exercise prices of $0.01 (33,333 shares) and $0.10 (33,333
      shares).                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Both warrant holders are members of the board of
      directors of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On September 15, 2008 the Company issued 6,500,000 shares
      of unregistered common stock to Trafalgar in connection with the
      restructuring of the payment schedule for the Secured Convertible
      Debentures issued to Trafalgar. See Note 4.                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On April 7, 2008, the Company entered into a
      non-exclusive investment banking arrangement for a six month period. The
      Company paid an initial non-refundable $5,000 retainer and was obligated
      to pay an additional monthly retainer of $2,500 for 6 months effective on
      May 15, 2008. In addition, the Company issued 250,000 unregistered common
      shares on May 15, 2008 which were valued at $0.15 per share and have been
      charged to operations during the nine months ended October 31,
  2008.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On February 1, 2008, the Company issued 150,000
      unregistered common shares for discretionary management compensation.
      Compensation expense of $39,000, based on the market value of $0.26, was
      recorded during the nine months ended October 31, 2008.                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Issued and outstanding common shares as of January 31,
      2008 as previously reported (67,590,681 shares) has been corrected to
      properly exclude the grant of 2,720,000 share of unvested incentive stock.
      This correction has no effect on previously reported net income (loss) or
      net income (loss) per share as the Company properly excluded these shares
      and associated expense in the January 31, 2008 consolidated financial
      statements.                                                      

14

---

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

|7. | DERIVATIVE LIABILITIES                                                          
|-- | --------------------------------------------------------------------------------
|   |                                                                                 
|   | Fair values of derivative liabilities at October 31, 2008
      were as follows:

| |                                         |   | Compound    |  |   |             |  |   |             | 
| | --------------------------------------- | - | ----------- |  | - | ----------- |  | - | ----------- | 
| |                                         |   | Embedded    |  |   | Warrant     |  |   | Total       | 
| |                                         |   | Derivatives |  |   | Derivatives |  |   | Derivatives | 
| | $936,400 convertible debenture          |   |             |  |   |             |  |   |             | 
| | due
      February 27, 2009             | $ | 678,088     |  | $ | -           |  | $ | 678,088     | 
| | $4,904,042 convertible debenture        |   |             |  |   |             |  |   |             | 
| | due
      September 30, 2009            |   | 5,155,991   |  |   | -           |  |   | 5,155,991   | 
| | $97,000 convertible debenture           |   |             |  |   |             |  |   |             | 
| | due
      December 1, 2010              |   | 103,462     |  |   | -           |  |   | 103,462     | 
| | 2004 warrants expiring October 6, 2009  |   |             |  |   | 75,332      |  |   | 75,332      | 
| | 2004 warrants expiring October 10, 2010 |   |             |  |   | 271,205     |  |   | 271,205     | 
| | 2004 warrants expiring April 6, 2011    |   |             |  |   | 10,280      |  |   | 10,280      | 
| | 2004 warrants expiring October 6, 2011  |   |             |  |   | 25,077      |  |   | 25,077      | 
| |                                         | $ | 5,937,541   |  | $ | 381,894     |  | $ | 6,319,435   | 

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

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

| |                               |   | Three Months Ended |   |   | Nine Months Ended |  
| | ----------------------------- | - | ------------------ | - | - | ----------------- | -
| |                               |   | October 31,        |   |   | October 31,       |  
| |                               |   | 2008               |   |   | 2007              |  
| | Compound embedded derivatives |   | (982,699           | ) |   | (290,265          | )
| | Warrant Derivatives           |   | 695,282            |   |   | (366,085          | )
| |                               | $ | (287,417           | ) | $ | (656,350          | )

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

| |                                         |  | Warrant     |  |  | Conversion  | 
| | --------------------------------------- |  | ----------- |  |  | ----------- | 
| |                                         |  | Derivatives |  |  | Features    | 
| | $936,400 convertible debenture          |  |             |  |  |             | 
| | due
      February 27, 2009             |  | n/a         |  |  | 24,827,355  | 
| | $4,904,042 convertible debenture        |  |             |  |  |             | 
| | due September 30, 2008                  |  | n/a         |  |  | 114,577,594 | 
| | $97,000 convertible debenture           |  |             |  |  |             | 
| | due
      December 1, 2010              |  | n/a         |  |  | 2,282,353   | 
| | 2004 warrants expiring October 6, 2009  |  | 9,212,400   |  |  |             | 
| | 2004 warrants expiring October 10, 2010 |  | 11,055,264  |  |  |             | 
| | 2004 warrants expiring April 6, 2011    |  | 314,276     |  |  |             | 
| | 2004 warrants expiring October 6, 2011  |  | 876,200     |  |  |             | 
| |                                         |  | 21,458,140  |  |  | 141,687,302 | 

For information and significant
assumptions embodied in our valuations (including range for certain assumptions)
see Note 12 to financial statements in the January 31, 2008 Form 10-K.

15

---

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

|8. | CASH FLOW INFORMATION                         
|-- | ----------------------------------------------
|   |                                               
|   | (a)           Supplemental
        Information

| |                                          |   | Nine months ended | 
| | ---------------------------------------- | - | ----------------- | 
| |                                          |   | October 31, 2008  | 
| | Cash paid during the period for Interest | $ | 3,489,493         | 

|    | (b)          
        Supplemental non-cash information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the nine months ended October 31, 2007, the
      Company issued $5,800,000 of Convertible Debentures in which $1,162,551 of
      proceeds were allocated and capitalized as deferred financing costs. See
      Note 7(a) to financial statements in the January 31, 2008 Form 10-KSB.
      During this same period, the Company also negotiated the settlement of a
      $466,337 trade payable which resulted in a gain on debt forgiveness of
      $391,337.                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the nine months ended October 31, 2008, the
      Company issued 12,030,660 shares of common stock in connection with
      conversions of $766,600 of face value of convertible debentures and related derivative liabilities and
      $103,375 of accrued interest of convertible debentures. Such amounts were
      credited to equity.                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company further issued 6,500,000 shares of common
      stock for convertible debenture extension and extinguishment of warrants.
      As of result, $722,655 was credited to equity.                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company issued 66,666 shares of common stock in
      connection with the exercise of warrants linked to the convertible
      debenture due December 1, 2010. Proceeds of $3,666 were credited to
      equity. The Company also issued 1,189,882 shares of common stock in
      connection with the exercise of warrants expiring on September 5, 2008.
      Proceeds of $178,483 were credited to equity.                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|9.  | SALE OF SOFTWARE OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On July 2, 2008, the Company sold certain of its assets
      related to the software line of products to Constellation Homebuilder
      Systems Inc., a Delaware corporation, and Constellation Homebuilder
      Systems, Corp., a corporation incorporated under the laws of the Province
      of Ontario (together, Constellation) for a selling price of $2,509,000
      and the assumption by Constellation of certain liabilities. A gain of
      $2,514,229 has been recognized in the accompanying Condensed Consolidated
      Statement of Operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The assets sold to Constellation included $22,240 of net
      receivables and depreciated assets with a cost of $146,882 and a book
      value of $18,023. Constellation assumed $54,492 of liabilities consisting
      of prepaid software support and uninstalled software. All rights to the
      source code of all software products previously sold by the Company were
      conveyed to Constellation under the agreement, including the customer base
      and all ongoing revenue derived from the software as of July 1,
    2008.                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company retained all the consulting portion of its
      business and intends to continue to operate and expand that segment of its
      operations.                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10. | SEGMENT INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company operates and manages its business in two
      segments, which are its used car sales and financing segment (Carbiz Auto
      Credit or CAC), including its new acquisitions Carbiz Auto Credit AQ
      or AQ and Texas Auto Credit or Texas Auto, and its previous joint
      venture (JV1), and various consulting services offered to independent
      car dealerships (Consulting and Software).                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In prior years, JV1 has been displayed as a separate
      segment of operations. The Company purchased the 50% portion of JV1 it did
      not own on January 24, 2008, and as a result, the Company now consolidates
      the JV1                                                                                                                                                                                                                                                                                                                                   

16

---

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

|10. | SEGMENT INFORMATION (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | results with the other CAC results. All of the Companys
      revenue is generated in the United States and all of the Companys assets
      are located in the U.S.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Consulting and Software consists of new sales and monthly
      revenues for software products through June 2008 and other related revenue
      from credit bureau fees, supply sales and forms programming, and new sales
      and recurring monthly revenues of consulting products. On July 2, 2008,
      the Company sold the assets and operations related to its dealer software
      (See Note 9). The results in the Consulting and Software segment for the
      three months and nine months ended October 31 2008 include all revenue and
      expenses related to the software operations through June 30, 2008 and
      therefore only five months of software sales and expenses are included in
      the nine months ended October 31, 2008.

17

---

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

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

| |                               |  |   | Carbiz Auto |   |   | Consulting and |   |   |            |  
| | ----------------------------- |  | - | ----------- | - | - | -------------- | - | - | ---------- | -
| |                               |  |   | Credit      |   |   | Software       |   |   | Total      |  
| | Three months ended October 31 |  |   |             |   |   | 2008           |   |   |            |  
| | Sales                         |  | $ | 13,770,794  |   | $ | 112,449        |   | $ | 13,883,243 |  
| | Cost of Sales                 |  |   | 8,139,743   |   |   | 164,107        |   |   | 8,303,850  |  
| | Gross Profit                  |  |   | 5,631,051   |   |   | (51,658        | ) |   | 5,579,393  |  
| | Operating Expenses
      (1)  |  |   | 6,089,884   |   |   | 742,304        |   |   | 6,832,188  |  
| | Loss From Segments            |  | $ | (458,833    | ) | $ | (793,962       | ) |   | (1,252,795 | )
| | Depreciation & Amortization   |  |   |             |   |   |                |   |   | (27,833    | )
| | Total Operating Loss          |  |   |             |   |   |                |   | $ | (1,280,628 | )
| | Total Assets                  |  | $ | 29,573,964  |   | $ | 3,314,012      |   | $ | 32,887,976 |  
| | Three months ended October 31 |  |   |             |   |   | 2007           |   |   |            |  
| | Sales                         |  | $ | 832,021     |   | $ | 575,533        |   | $ | 1,407,554  |  
| | Cost of Sales                 |  |   | 532,879     |   |   | 301,298        |   |   | 834,177    |  
| | Gross Profit                  |  |   | 299,142     |   |   | 274,235        |   |   | 573,377    |  
| | Operating Expenses (1)        |  |   | 696,022     |   |   | 955,036        |   |   | 1,651,058  |  
| | Loss From Segments            |  | $ | (396,880    | ) | $ | (680,801       | ) |   | (1,077,681 | )
| | Depreciation & Amortization   |  |   |             |   |   |                |   |   | (17,106    | )
| | Total Operating Loss          |  |   |             |   |   |                |   | $ | (1,094,787 | )
| | Total Assets                  |  | $ | 19,723,655  |   | $ | 4,482,247      |   | $ | 24,205,902 |  
| | Nine months ended October 31  |  |   |             |   |   | 2008           |   |   |            |  
| | Sales                         |  | $ | 30,489,755  |   | $ | 1,100,708      |   | $ | 31,590,463 |  
| | Cost of Sales                 |  |   | 17,659,835  |   |   | 819,390        |   |   | 18,479,225 |  
| | Gross Profit                  |  |   | 12,829,920  |   |   | 281,318        |   |   | 13,111,238 |  
| | Operating Expenses (1)        |  |   | 12,873,267  |   |   | 2,630,468      |   |   | 15,503,735 |  
| | Loss From Segments            |  | $ | (43,347     | ) | $ | (2,349,150     | ) |   | (2,392,497 | )
| | Depreciation & Amortization   |  |   |             |   |   |                |   |   | (107,511   | )
| | Total Operating Loss          |  |   |             |   |   |                |   | $ | (2,500,008 | )
| | Total Assets                  |  | $ | 29,573,964  |   | $ | 3,314,012      |   | $ | 32,887,976 |  
| | Nine months ended October 31  |  |   |             |   |   | 2007           |   |   |            |  
| | Sales                         |  | $ | 1,464,344   |   | $ | 1,767,186      |   | $ | 3,231,530  |  
| | Cost of Sales                 |  |   | 1,005,871   |   |   | 763,100        |   |   | 1,768,971  |  
| | Gross Profit                  |  |   | 458,473     |   |   | 1,004,086      |   |   | 1,462,559  |  
| | Operating Expenses (1)        |  |   | 901,869     |   |   | 2,953,346      |   |   | 3,855,215  |  
| | Loss From Segments            |  | $ | (443,396    | ) | $ | (1,949,260     | ) |   | (2,392,656 | )
| | Depreciation & Amortization   |  |   |             |   |   |                |   |   | (55,747    | )
| | Gain on Debt Forgiveness      |  |   |             |   |   |                |   |   | 391,337    |  
| | Total Operating Loss          |  |   |             |   |   |                |   | $ | (2,057,066 | )
| | Total Assets                  |  | $ | 19,723,655  |   | $ | 4,482,247      |   | $ | 24,205,902 |  

(1) Excluding depreciation and
amortization

|11. | COMMITMENTS AND CONTINGENCIES.                            
|--- | ----------------------------------------------------------
|    |                                                           
|    | See Note 5 for Registration Rights liquidated
    damages.

18

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

The
following Managements Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements concerning our
revenues, operating results, and financial condition. Such forward-looking
statements include our intent to open additional credit centers in the future;
our expectations regarding the future revenues for, and the market acceptance
of, our consulting service, and our expectations regarding future expense levels
related to our credit center business and interest expenses. The following
discussion should also be read in conjunction with the Companys interim
condensed consolidated financial statements as of October 31, 2008 and the
January 31, 2008 audited consolidated financial statements included in our
January 31, 2008 Form 10-KSB.

Overview

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

- Direct auto sales and related financing (Carbiz Auto Credit centers)through our self provided on-site specialty finance business at 26 company
  owned locations; and
- Software product and support sales and business model consulting
  servicesthrough initial software license fees and subsequent support
  agreements, which provide monthly maintenance fees as well as through a
  combination of one-time consulting fees and monthly business analysis
  services. The software division was sold on July 2, 2008 and as of July 1,
  2008, our ongoing revenue stream consists of new sales and monthly revenue
  from consulting products, training products, Buy Here- Pay Here performance
  groups, seminars, other one time dealer assistance, and supply sales.

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

Over
the past twelve months we have experienced significant changes in every area of
our operations. In October 2007, we began a process of significant change
through the acquisition of a large Midwestern chain of automobile dealerships
and a portfolio of associated consumer loans. Subsequently, in December, we
purchased an additional portfolio of consumer loans and opened our first
Supercenter in Houston, Texas. In July 2008 we sold our software operations
and retained our business model consulting services.

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

In
terms of our existing consulting business, our substantial customer base of
consulting clients continues to grow organically and provides both a stable
revenue base of monthly support and continuing opportunities for providing
additional consulting services to those dealers. During the nine months ended
October 31, 2008, we introduced several new consulting products including
seminar and training products that are approved by and marketed in conjunction
with state dealer associations and other dealer groups, and Performance Groups,
a new form of dealer 20 Group (moderated groups of similar but geographically
separated dealers who exchange financial and operational information) structured
specifically for the Buy Here-Pay Here dealer market. Initial acceptance of the
Performance Group product has been outstanding, with over 65 dealer locations
enrolled in groups, with over $76,000,000 total loan portfolio balances.

Critical Accounting Policies

Revenue Recognition

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

19

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accrued is suspended on non-performing loans. A loan is
considered non-performing and pending charge off after the loan is delinquent
for 60 days.

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

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

Use of Estimates

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

Share-Based Compensation

All
share-based payments (stock options and stock grants) to employees are
recognized based upon their fair value at the date of grant in accordance with
Financial Accounting Standard 123R Share Based Payments and SEC Staff
Accounting Bulletin No. 107.

Convertible debentures and Derivative Liabilities

We
account for convertible debentures, warrants and other embedded features issued
in connection with financing arrangements in accordance with Financial
Accounting Standard No. 133 Accounting for Derivative Instruments and Hedging
Activity (FAS 133) and Emerging Issues Task Force (EITF) Issue No. 00-19,
Accounting for Derivative Financial Instruments, Indexed to, and Potentially
Settled in, a Companys Own Stock (EITF 00-19). Pursuant to EITF 00-19, an
evaluation of specifically identified conditions is made to determine whether
the fair value of warrants and embedded features is required to be classified as
a derivative liability. Per FAS 133, we account for bifurcated embedded features
at fair value and classify such instruments as derivative liabilities.
Derivative liabilities are adjusted for changes in fair value at each reporting
period, and the corresponding non-cash gain or loss is recorded in current
period earnings.

Allowance for credit losses

The
Company maintains an allowance for credit losses on an aggregate basis at a
level it considers sufficient to cover estimated losses in the collection of its
finance receivables. The allowance for credit losses is based primarily upon
historical credit loss experience, with consideration given to recent credit
loss trends and changes in loan characteristics (i.e., average amount financed
and term), delinquency levels, collateral values, economic conditions and
underwriting and collection practices. The allowance for credit losses is
periodically reviewed by management with any changes reflected in current
operations. Although it is at least reasonably possible that events or
circumstances could occur in the future that are not presently foreseeable which
could cause actual credit losses to be materially different from the recorded
allowance for credit losses, the Company believes that it has given appropriate
consideration to all relevant factors and has made reasonable assumptions in
determining the allowance for credit losses.

20

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Three Month Financial Information

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

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

|                                 |   | October    |   |  | % of    |   |   | October    |   |  | % of    |  
|-------------------------------- | - | ---------- | - |  | ------- | - | - | ---------- | - |  | ------- | -
|                                 |   | 2008       |   |  | Revenue |   |   | 2007       |   |  | Revenue |  
|Revenue                          | $ | 13,883,243 |   |  | 100.0   |   | $ | 1,407,554  |   |  | 100.0   |  
|Cost of sales                    |   | 8,303,850  |   |  | 59.8    |   |   | 834,177    |   |  | 59.3    |  
|Gross profit                     |   | 5,579,394  |   |  | 40.2    |   |   | 573,377    |   |  | 40.7    |  
|Operating expenses               |   | 6,860,021  |   |  | 49.4    |   |   | 1,668,164  |   |  | 118.5   |  
|Operating income (loss)          |   | (1,280,628 | ) |  | (9.2    | ) |   | (1,094,787 | ) |  | (77.8   | )
|Interest and other expense       |   | (3,037,922 | ) |  | 21.9    |   |   | (595,542   | ) |  | 42.3    |  
|Loss on derivative instruments   |   | (287,417   | ) |  | 2.0     |   |   | (656,350   | ) |  | 46.6    |  
|Loss on debt extinguishment      |   | (1,205,720 | ) |  | 8.7     |   |   | -          |   |  | -       |  
|Write-off of deferred loan costs |   | -          |   |  | -       |   |   | (409,533   | ) |  | 29.1    |  
|Minority interest in losses      |   | -          |   |  | -       |   |   | 10,687     |   |  | 0.8     |  
|NET LOSS                         | $ | (5,811,687 | ) |  | (41.8   | ) | $ | (2,745,525 | ) |  | (195.1  | )
|Loss per common share            | $ | (0.08      | ) |  |         |   | $ | (0.04      | ) |  |         |  

Revenue

In
the three months ended October 31, 2008, our revenues increased by $12,475,689
compared to the same period ended October 31, 2007. This was primarily due to
our acquisition of a number of buy-here-pay-here credit centers. Our Carbiz Auto
Credit locations that were in operation during the third quarter of 2007 had
total sales during the three months-ended October 31, 2008 of $419,320 compared
to the previous periods sales of $252,830. Our new Midwest locations acquired
October 1, 2007 provided $12,037,016 of sales and our Houston location provided
$1,314,458 of sales. Our consulting products group had sales of $112,449 during
the three months ended October 31, 2008 as compared to $575,533 during the same
period ended October 31, 2007 as a result of the sale of our software operations
on July 2, 2008.

In
the three months ended October 31, 2008, we sold 1,055 cars compared to 946 cars
during the three months ended July 31, 2008, an increase of 11.5% from the
previous three months. Total revenue from car sales during the three months
ended October 31, 2008 was $13,770,793 compared to $6,909,797 during the three
months ended July 31, 2008, an increase of 99.3% . This was a result of an
increase in both the total cars sold and the average selling price per car,
which was $11,008 and $6,910 during the three months ended October 31, 2008 and
July 31, 2008, respectively, an increase of $4,098 per car.

Interest
income for the three months ended October 31, 2008 increased by $888,582
compared to the previous years three month period, due to a full year of
operations of the acquired Midwest buy-here-pay-here credit centers and the
acquisition of the Houston portfolio. Our Midwest and Florida locations provided
$1,071,731 of interest income for the three months ended October 31, 2008, and
our Houston location provided $396,042 of interest income for such period.

Cost of Sales

Our
cost of sales expense increased by $7,469,673 for the three months ended October
31, 2008, compared to the previous years three month period. Carbiz Auto Credit
operations cost of sales increased by $7,606,864, due to our Midwest and Houston
locations. Our software and consulting products cost of sales expense decreased
$137,190 during the three months ended October 31, 2008 due to the sale of the
software operations on July 2, 2008, primarily due to decreased personnel
expense.

21

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Expenses

For
the three months ended October 31, 2008, our personnel expenses increased by
$274,143 compared to the previous years three month period. This was due to the
additional corporate staff to support the acquired Midwest and Texas locations.
Selling expenses increased for the three months ended October 31, 2008 by
$174,246 due to additional advertising to support the Midwest and Texas
locations. Professional fees decreased by $69,210 as a result of professional
fees in the prior year period associated with the negotiation and execution of
financing agreements. Other operating expenses increased by $93,704 during the
three month period ended October 31, 2008, due to the general office, and other
expenses incurred by the acquired Midwest and Texas locations.

The
additional Midwest and Texas locations have required a moderate investment in
fixed assets and as a result, depreciation expense increased for the period by
$10,727 which is included in the condensed consolidated statements of
operations.

Bad Debt Expense

For
the three months ended October 31, 2008, the total amount of loans charged off
to bad debt was $3,030,393 compared to $3,010,213 for the three months ended
July 31, 2008, which primarily related to our CarBiz Auto Credit loan portfolio
Additional non-performing portions of the portfolios acquired in the Midwest and
Texas in 2007 were charged off during the period, and we expect that the
remaining acquired loans will perform to the level of new loans written with our
underwriting standards.

At
October 31, 2008, approximately three fourths of our total Midwest portfolio
consists of loans that have been originated since the acquisition. During the
three months ended October 31, 2008, $933,218 of the acquired portfolio was
charged off compared to $1,225,906 for the three months ended July 31, 2008, and
$1,045,518 of the portfolio originated by us was charged off compared to
$697,173 during the three months ended July 31, 2008. The Texas portfolio at
October 31, 2008 is approximately 89% acquired loans since new loans are
originated only from one location. During the three months ended October 31,
2008, $1,264,060 of the acquired portfolio was charged off compared to $913,070
during the three months ended July 31, 2008.

Interest Expense

Our
interest expense and other expenses increased by $2,442,380 for the three months
ended October 31, 2008, compared to the previous years three month period, as a
result of the issuance of the four convertible debentures during the prior
fiscal year and the increase in the outstanding balances of various credit
facilities to support our Midwest and Texas operations. Interest expense
associated with convertible debenture financings is recognized based on the
effective interest method, and interest expense is therefore expected to
increase due to increased carrying values. The current line of credit balance
reflects the total borrowed against the acquired loan portfolios and newly
generated sales at the Midwest and Texas locations. We anticipate our interest
expense will increase over this and subsequent years while the convertible
debentures remain outstanding and as we borrow additional funds to finance
additional inventory and customer loans.

Gain/Loss on Derivative Instruments

For
the three months ended October 31, 2008, we incurred a non-cash loss of $287,417
as a result of the fair value adjustment of outstanding derivative instruments
which is based primarily on fluctuations in our stock price. During the three
months ended October 31, 2007 we incurred a non-cash loss of $656,350 including
day one derivative losses on new financings. We expect gains and losses on
derivative instruments in the future while the convertible debentures, the host
instrument of the derivative liabilities, and related warrants remain
outstanding.

Software Sales, Support and Consulting

Through
June 30, 2008, this segment of our business consisted of new sales and monthly
revenue for software products and new sales and other related products including
revenue from credit bureau fees, supply sales, and forms programming, and new
sales and monthly revenue for consulting products. The software operation of
this segment was sold on July 2, 2008. As of July 1, 2008, our ongoing revenue
stream will consist of new sales and monthly revenue from consulting products,
training products, Buy Here-Pay Here performance groups, seminars, other one
time dealer assistance, and supply sales.

22

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Total
consulting sales during the three months ended October 31, 2008 decreased from
the prior years three month period by $463,084. The three month period this
year included no software revenue as compared to three months revenue in the
same period last year.

Bad Debt Provision

As
of October 31, 2008, the total Carbiz Auto Credit loan portfolio was
$33,701,431. The allowance for doubtful accounts at the same date was $7,496,567
for the vehicle loan portfolio and $1,198 for software and consulting business
for a total of $7,497,765.

After
the acquisition of the Midwest and Houston portfolios, we determined that since
our historical portfolio of approximately $750,000 in our Florida stores is now
a very small percentage of the total portfolio, it is appropriate to apply a
percentage to the entire portfolio rather than use a different method on that
portion of the portfolio.

It
is not reasonable to expect that the acquired portfolio will perform as well as
if we had originated every loan. Therefore, we have determined that a percentage
above our own historical level, but better than the industry average, is
appropriate for the reserve calculation going forward. In addition, because of
the large number of accounts and physical locations, we also determined that
identifying all pending repossessions at the reporting date was unrealistic
except in Houston. Those factors led to the application of a 20% reserve
calculation on the total balance of the Florida and Midwest originated and the
Midwest acquired portfolio. A number of loans have recently been placed in
pending repossession status in the Houston portfolio, with a total balance of
$738,371. After deducting that amount from the portfolio total, a factor of 21%
was applied to calculate the reserve for the balance of the Houston portfolio.
The total reserve calculated for the Houston portfolio includes the specific
amount of $738,371 plus the calculated reserve on the balance of the portfolio.
These percentages are in line with industry averages, but will be re-evaluated
with more experience in collection results.

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

Nine Month Financial Information

The
following summary of selected financial information for the nine month periods
ended October 31, 2008 and 2007 is derived from, and should be read in
conjunction with, and is qualified in its entirety by reference to, our
condensed consolidated financial statements, including the notes thereto, as of
and for periods ended October 31, 2008 and 2007.

Nine months ended October 31, 2008 compared to the nine
months ended October 31, 2007

|                                            |   |            |   |  |         |   |   | October    |   |  |         |  
|------------------------------------------- | - | ---------- | - |  | ------- | - | - | ---------- | - |  | ------- | -
|                                            |   | October    |   |  | % of    |   |   | 2007       |   |  | % of    |  
|                                            |   | 2008       |   |  | Revenue |   |   |            |   |  | Revenue |  
|Revenue                                     | $ | 31,590,462 |   |  | 100.0   |   | $ | 3,231,530  |   |  | 100.0   |  
|Cost of sales                               |   | 18,479,225 |   |  | 58.5    |   |   | 1,768,971  |   |  | 51.2    |  
|Gross profit                                |   | 13,111,238 |   |  | 41.5    |   |   | 1,462,559  |   |  | 48.8    |  
|Gain on debt forgiveness                    |   | -          |   |  | -       |   |   | 391,337    |   |  | 21.5    |  
|Operating expenses                          |   | 15,611,246 |   |  | 49.4    |   |   | 3,910,962  |   |  | 121.0   |  
|Operating loss                              |   | (2,500,008 | ) |  | (7.9    | ) |   | (2,057,066 | ) |  | (63.7   | )
|Interest expense                            |   | (6,822,286 | ) |  | 21.6    |   |   | (834,479   | ) |  | 25.8    |  
|Gain (loss) on derivative instruments       |   | 3,758,246  |   |  | 11.9    |   |   | (1,408,092 | ) |  | (43.5   | )
|Loss on debt extinguishment                 |   | (1,205,720 | ) |  | 3.8     |   |   | -          |   |  | -       |  
|Gain on sale of software division           |   | 2,514,229  |   |  | 7.9     |   |   | -          |   |  | -       |  
|Write-off of deferred financing
      costs |   | -          |   |  | -       |   |   | (409,533   | ) |  | 12.7    |  
|Minority interest income (loss)             |   | -          |   |  | -       |   |   | 11,721     |   |  | 0.4     |  
|NET INCOME (LOSS)                           | $ | (4,255,539 | ) |  | 13.5    |   | $ | (4,697,449 | ) |  | (145.4  | )
|Income (loss) per common share              | $ | (0.06      | ) |  |         |   | $ | (0.08      | ) |  |         |  

23

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Revenue

In
the nine months ended October 31, 2008, our revenues increased by $28,358,932
compared to our nine-month period ended October 31, 2007. This increase was due
to our acquisition of a number of buy-here-pay-here credit centers. Our Carbiz
Auto Credit locations that were in operation during the nine months ended
October 31, 2007 had total sales during the nine months ended October 31, 2008
of $976,271 compared to the previous periods sales of $521,320. Our new Midwest
locations acquired October 1, 2007 provided $25,786,891 of sales and our Houston
location provided $3,726,592. Our software and consulting products had sales of
$1,100,708 for the nine months ended October 31, 2008 compared to $1,767,186 for
the same period ended October 31, 2007 as a result of the sale of the software
operations on July 2, 2008.

Interest
income for the nine months ended October 31, 2008 increased by $4,156,715
compared to the previous years nine month period, primarily due to the
acquisitions of buy-here-pay-here credit centers and the related loan
portfolios. Interest income from our three original Carbiz Auto Credit locations
during the nine months ended October 31, 2008 was $84,824 compared to the
previous years nine month period of $59,436. Our Midwest locations acquired
October 1, 2007 provided $2,974,269 of interest income for the nine months ended
October 31, 2008, and our Houston location provided $1,717,810 of interest
income for such period.

Cost of Sales

Our
cost of sales expense increased by $16,710,254 for the nine months ended October
31, 2008, compared to the same period ended October 31, 2007. Carbiz Auto Credit
operations cost of sales increased by $16,653,964 due to the addition of our
Midwest and Houston locations. We anticipate that our cost of sales expense will
continue to increase as we experience full fiscal year operations from the newly
acquired credit centers. Our software and consulting products cost of sales
expense increased $56,290 during the nine months ended October 31, 2008 due to
the sale of the software operations on July 2, 2008.

Expenses

For
the nine months ended October 31, 2008, our personnel expenses increased by
$1,037,149 compared to the previous years nine month period. This was due to
the additional corporate staff to support newly acquired Midwest and Texas
locations. Selling expenses increased for the nine months ended October 31, 2008
by $381,256 due to additional advertising to support the Midwest and Texas
locations. Professional fees increased by $66,045 due to increased audit and
legal costs related to the increase in company size, maintenance of lines of
credit and floor plans, and registration of shares in support of various
debenture financings. Other operating expenses increased by $1,356,596 during
the nine month period ended October 31, 2008, due to the general office, rent
expense and other expenses incurred by the acquired Midwest and Texas
locations.

Bad Debt Expense

For
the nine months ended October 31, 2008, the total amount of loans charged off to
bad debt was $9,121,676, which primarily relates to our CarBiz Auto Credit loan
portfolio. Non-performing portions of the portfolios acquired in the Midwest and
Texas in 2007 were charged off during the period, while we expect that the
remaining acquired loans may not perform to the level of new loans written with
our underwriting standards. At October 31, 2008, approximately three fourths of
our total Midwest portfolio consists of loans that have been originated since
the acquisition. During that period, $4,229,189 of the acquired portfolio was
charged off and $1,662,301 of the portfolio originated by us was charged off.
The Texas portfolio at October 31, 2008 is approximately 89% acquired loans
since new loans are originated only from one location. During the nine month
period ended October 31, 2008, $2,774,314 of the acquired loans was charged off
and $7,933 of the portfolio originated by us was charged off.

The
total amounts charged off during the period ended October 31, 2008 resulted in
total bad debt expense of $8,863,710 and an ending balance in our bad debt
reserve of $7,497,765 (including $1,198 related to software and consulting) (See
Note 2).

Interest Expense

Our
interest expense increased by $5,987,807 for the nine months ended October 31,
2008, compared to the same period ended October 31, 2007, as a result of the
convertible debentures and the line of credit. We anticipate

24

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our interest expense will increase over this and subsequent
years related to the amortization of discounts on Trafalgar Debentures and as we
borrow additional funds under credit facilities.

Gain/Loss on Derivative Instruments

For
the nine months ended October 31, 2008, we incurred a non-cash gain of
$3,758,246 as a result of the fair value adjustment of outstanding derivative
instruments which are based primarily on the fluctuations in our stock price.
For the same period ended October 31, 2007, we incurred a non-cash loss of
$(1,408,092) including day one derivative losses on new financings. We expect
gains and losses on derivative instruments in the future while the convertible
debentures, the host instruments of the derivative liabilities, and related
warrants remain outstanding.

Software Sales, Support and Consulting

Through
June 30, 2008, this segment of our business consisted of new sales and recurring
monthly revenue for software products and new sales and other related products
including revenue from credit bureau fees, supply sales, and forms programming,
and new sales and monthly revenue for consulting products. The software
operation of this segment was sold on July 2, 2008. As of July 1, 2008 our
ongoing revenue stream will consist of new sales and monthly revenue from
consulting products, training products, BHPH performance groups, seminars, other
one time dealer assistance, and supply sales.

Total
software and consulting sales during the nine months ended October 31, 2008
decreased from the prior years nine month period by $666,478. The nine month
period this year included only five months of software revenue as compared to
the nine months revenue in the same period last year.

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

Bad Debt Provision

As
of October 31, 2008, the total Carbiz Auto Credit loan portfolio was
$33,701,431. The allowance for doubtful accounts at the same date was $7,496,567
for the vehicle loan portfolio and $1,198 for software and consulting business
for a total of $7,497,765.

After
the acquisition of the Midwest and Houston portfolios, we determined that since
our historical portfolio of approximately $750,000 in our Florida stores is now
a very small percentage of the total portfolio, it is appropriate to apply a
percentage to the entire portfolio rather than use a different method on that
portion of the portfolio.

It
is not reasonable to expect that the acquired portfolio will perform as well as
if we had originated every loan. Therefore, we have determined that a percentage
above our own historical level, but better than the industry average, is
appropriate for the reserve calculation going forward. In addition, because of
the large number of accounts and physical locations, we also determined that
identifying all pending repossessions at the reporting date was unrealistic
except in Houston. Those factors led to the application of a 20% reserve
calculation on the total balance of the Florida and Midwest originated and the
Midwest acquired portfolio. A number of loans have recently been placed in
pending repossession status in the Houston portfolio, with a total balance of
$738,371. After deducting that amount from the portfolio total, a factor of 21%
was applied to calculate the reserve for the balance of the Houston portfolio.
The total reserve calculated for the Houston portfolio includes the specific
amount of $738,371 plus the calculated reserve on the balance of the portfolio.
These percentages are in line with industry averages, but will be re-evaluated
with more experience in collection results.

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

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Depreciation and amortization

Our
depreciation and amortization expense for the nine months ended October 31, 2008
was $107,511 as compared to $55,747 for the nine month period ended October 31,
2007. This increase is a result of capital additions related to our newly
acquired Midwest and Houston locations and the April, 2008 relocation of our
corporate offices in Florida.

Liquidity and Capital Resources

As
of January 31, 2008 and October 31, 2008, we had $1,141,271 and $557,831,
respectively, in cash and cash equivalents. During the nine month period ended
October 31, 2008, we increased our accounts payable and accrued liabilities by
$1,122,886, which totaled $4,201,446 at October 31, 2008. During the nine months
ended October 31, 2008, we made capital lease payments totaling $6,234.

During
the nine months ended October 31, 2008, we issued approximately 597,868 shares
at conversion prices ranging from $0.1105 to $0.1488 in a series of Trafalgar
convertible debenture conversions. Accordingly, no future cash will be required
to pay off this portion of the debentures.

On
September 15, 2008, the Company entered into an agreement with Trafalgar Capital
Specialized Investment Fund, Luxembourg (Trafalgar), which revised the
principal and interest payment schedules for certain of the outstanding Secured
Convertible Debentures issued by the Company to Trafalgar. Under this agreement,
we issued 2,500,000 shares to cancel 6,500,000 outstanding warrants for the
Trafalgar convertible debentures. We also issued 4,000,000 shares to Trafalgar
as a forbearance fee for delay of payments.

The
Companys primary lender, SWC Services, LLC, has ceased funding advances under
the Loan Agreement between it and the Company as a result of SWC Services
bankruptcy on October 20, 2008. The Company has ceased depositing into bank
accounts controlled by SWC the proceeds from the sale of automobiles and monies
received from customers who have financed the purchase of their vehicles through
loans from the Company, as required under the SWC loan agreement, and is using
such funds to meet obligations to its employees and vendors. However, the amount
of such funds is insufficient for the Company to replenish its vehicle
inventories at its dealerships and, as a result, revenues from the sales of
vehicles have declined substantially since early October and are expected to
continue to decline until new financing can be obtained.

The Company’s ability to continue its operations  is dependent upon its ability to obtain new financing to replace the Company’s  credit facilities with SWC.  The Company  and the bankruptcy trustee are negotiating regarding the control of funds  received by the Company and the terms under which SWC and the Company will  terminate the credit facilities and pay off the outstanding indebtedness.  As a result of the bankruptcy process and the  subsequent delay in processing, titles to vehicles sold by the Company since  the beginning of October, 2008 were not released to the Company on a timely  basis.  The Company and the bankruptcy  trustee have negotiated a process regarding the release by the trustee of  titles to sold cars and paid off loans on a normal daily basis.  To date, most such titles have been released  to the purchasers of the vehicles and the remainder is in process.  Most states’ laws provide the purchaser with  a right to rescind the purchase should the title of a sold car or the title of  a paid off car not be released to the purchaser on a timely basis.  Under the laws of certain states in which the  Company does business, the failure to deliver the vehicle title after purchase  can also subject the Company to fines and a revocation of its license to do  business in the state.

In
the event that SWC trustee attempts to foreclose on the collateral pledged under
the Loan Agreement, which is all of the assets of the Company, the Company
intends to challenge such foreclosure through all appropriate means. There can
be no assurance of the likelihood of success to such challenge. At October 31,
2008, there was a total balance of $41,287,764 borrowed under the SWC credit
facilities.

The
Company is presently discussing various financing alternatives with a number of
sources. However, the recent worldwide financial and credit crises have strained
investor liquidity and contracted credit markets, which will likely make the
cost of raising funds through the debt or equity markets more expensive or make
those markets unavailable. If additional financing is raised by the issuance of
securities, control of the Company may change and/or our shareholders may suffer
significant dilution. However, there can be no assurance that financing efforts
will be successful and, if it does, that the Company will achieve profitable
operations. The Company is unlikely to be able to continue its operations if it
is unable to obtain new financing in the very near future.

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

26

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Less Than
    
    
    One to Three
    
    
    Three to Five
    
    
    Greater thanOne Year
    
    
    Years
    
    
    Years
    
    
    Five Years
    
    
    TotalOperating Leases
    $
    1,539,598
    
    $
    1,858,090
    
    $
    728,974
    
    $
    939,750
    
    $
    5,066,412Capital Leases
    
    4,491
    
    
    -
    
    
    -
    
    
    -
    
    
    4,491Long-Term Debt
    
    41,287,764
    
    
    -
    
    
    -
    
    
    -
    
    
    41,287,764Convertible Debentures
    
    5,840,442
    
    
    97,000
    
    
    -
    
    
    -
    
    
    5,937,442Interest
    
    448,847
    
    
    10,841
    
    
    -
    
    
    -
    
    
    459,688$
    49,121,142
    
    $
    1,965,931
    
    $
    728,974
    
    $
    939,750
    
    $
    52,755,797


Off-Balance Sheet Arrangements

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

Item 4. Controls and Procedures

Disclosure Controls

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

Internal Control Over Financial Reporting

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

Limitations on the Effectiveness of Internal Controls

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

27

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PART II  OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors.

The
Companys senior lender has ceased providing funds to the Company, and the
Companys failure to obtain new financing will affect its ability to continue
its operations.

The
Companys primary lender, SWC Services, LLC, has ceased funding advances under
the Loan Agreement between it and the Company as a result of SWC Services
bankruptcy on October 20, 2008. The Company has ceased depositing into bank
accounts controlled by SWC the proceeds from the sale of automobiles and monies
received from customers who have financed the purchase of their vehicles through
loans from the Company, as required under the SWC loan agreement, and is using
such funds to meet obligations to its employees and vendors. However, the amount
of such funds is insufficient for the Company to replenish its vehicle
inventories at its dealerships and, as a result, revenues from the sales of
vehicles have declined substantially since early October and are expected to
continue to decline until new financing can be obtained.

The Company’s ability to continue its operations  is dependent upon its ability to obtain new financing to replace the Company’s  credit facilities with SWC.  The Company  and the bankruptcy trustee are negotiating regarding the control of funds  received by the Company and the terms under which SWC and the Company will  terminate the credit facilities and pay off the outstanding indebtedness.  As a result of the bankruptcy process and the  subsequent delay in processing, titles to vehicles sold by the Company since  the beginning of October, 2008 were not released to the Company on a timely  basis.  The Company and the bankruptcy  trustee have negotiated a process regarding the release by the trustee of  titles to sold cars and paid off loans on a normal daily basis.  To date, most such titles have been released  to the purchasers of the vehicles and the remainder is in process.  Most states’ laws provide the purchaser with  a right to rescind the purchase should the title of a sold car or the title of  a paid off car not be released to the purchaser on a timely basis.  Under the laws of certain states in which the  Company does business, the failure to deliver the vehicle title after purchase  can also subject the Company to fines and a revocation of its license to do  business in the state.

In
the event that SWC trustee attempts to foreclose on the collateral pledged under
the Loan Agreement, which is all of the assets of the Company, the Company
intends to challenge such foreclosure through all appropriate means. There can
be no assurance of the likelihood of success to such challenge. At October 31,
2008, there was a total balance of $41,287,764 borrowed under the SWC credit
facilities.

The
Company is presently discussing various financing alternatives with a number of
sources. However, the recent worldwide financial and credit crises have strained
investor liquidity and contracted credit markets, which will likely make the
cost of raising funds through the debt or equity markets more expensive or make
those markets unavailable. If additional financing is raised by the issuance of
securities, control of the Company may change and/or our shareholders may suffer
significant dilution. However, there can be no assurance that financing efforts
will be successful and, if it does, that the Company will achieve profitable
operations. The Company is unlikely to be able to continue its operations if it
is unable to obtain new financing in the very near future.

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

Trafalgar agreement

On
September 15, 2008, the Company issued 2,500,000 shares to Trafalgar in exchange
for the cancellation of all outstanding warrants to purchase the common stock of
the Company previously held by Trafalgar. In addition, the Company issued
4,000,000 shares to Trafalgar as a forbearance fee for delay of payments due
under the Senior Convertible Debentures issued to Trafalgar.

Conversion of October 1, 2007 convertible debentures

On
September 12, September 22, and October 3, 2008, holders of certain of the
Companys October 1, 2007 convertible debentures converted an aggregate of
$703,000 principal and $78,375 of accrued interest due under the debentures into
11,432.792 shares of common stock of the Company. Conversion prices ranged from
$0.051 to $0.085. All such holders are members of the board of directors or
senior management of the Company or members of their immediate families.

28

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Warrants exercised

On
October 3, 2008, two warrants issued as part of the October 1, 2007 convertible
debenture were exercised for 66,666 shares. The first warrant was for 33,333
shares at $0.01 and the second warrant was for 33,333 shares at $0.10. The
warrant holder was a member of the board of directors. Company received proceeds
of $3,667 which were used for general operations.

All
of the securities described above were issued by us in a transaction that was
exempt from registration under the Securities Act of 1933, as amended (the
Securities Act), by virtue of Section 4(2) of the Securities Act. Such sale
and issuance did not involve any public offering, was made without general
solicitation or advertising, and the recipients are accredited investors with
access to all relevant information necessary to evaluate the investment and
represented to us that the securities were being acquired for investment.

Item 3. Defaults Upon Senior Securities

As
a result of the failure of the Companys primary lender, SWC Services, LLC, to
provide funding under the Loan Agreement between it and the Company as a result
of the bankruptcy of SWC Services, the Company ceased depositing into bank
accounts controlled by SWC the proceeds from the sale of automobiles and monies
received from customers who have financed the purchase of their vehicles through
loans from the Company, as required under the SWC loan agreement, and is using
such funds to meet obligations to its employees and vendors. This constitutes an
event of default under the Loan Agreement.

The
Companys ability to continue its operations is dependent upon its ability to
obtain new financing to replace the Companys credit facilities with SWC. The
Company and the bankruptcy trustee are negotiating regarding the control of
funds received by the Company and the terms under which SWC and the Company will
terminate the credit facilities and pay off the outstanding indebtedness.

In
the event that SWC trustee attempts to foreclose on the collateral pledged under
the Loan Agreement, which is all of the assets of the Company, the Company
intends to challenge such foreclosure through all appropriate means. There can
be no assurance of the likelihood of success to such challenge. At October 31,
2008, there was a total balance of $41,287,764 borrowed under the SWC credit
facilities.

The
Company is presently discussing various financing alternatives with a number of
sources. However, the recent worldwide financial and credit crises have strained
investor liquidity and contracted credit markets, which will likely make the
cost of raising funds through the debt or equity markets more expensive or make
those markets unavailable. If additional financing is raised by the issuance of
securities, control of the Company may change and/or our shareholders may suffer
significant dilution. However, there can be no assurance that financing efforts
will be successful and, if it does, that the Company will achieve profitable
operations. The Company is unlikely to be able to continue its operations if it
is unable to obtain new financing in the very near future.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

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

|Exhibit Number | 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

29

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SIGNATURES

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



|                        | CARBIZ INC.                  
|----------------------- | -----------------------------
|                        |                              
|                        |                              
|                        |                              
|Date: December 10, 2008 | /s/ Carl Ritter              
|                        | Carl
      Ritter            
|                        | Chief
      Executive Officer
|                        | (principal executive officer)

30

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