---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 31, 2009

OR

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

For the transition period from ________________to
_______________

Commission file Number: 000-52209

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

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

7115 16thStreet East, Suite 105 Sarasota,
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 has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of regulation
S-T (Section 229.405) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes [ ] No[
]

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

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

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

As of September 10, 2009, 104,560,373 common shares of the
Registrant were issued and outstanding.

---

CARBIZ INC.

FORM 10-Q

For the Quarterly Period Ended July 31, 2009

INDEX

|PART I        | Financial
      Information                                                                 |   
|------------- | ------------------------------------------------------------------------------------------- | --
|Item 1.       | Financial
      Statements                                                                  | 1 
|Item
      2. | Managements Discussion and Analysis of Financial
      Condition and Results of Operations | 23
|Item 3.       | Quantitative
      and Qualitative Disclosures about Market Risk                            | 35
|Item
      4T | Controls and Procedures                                                                     | 36
|              |                                                                                             |   
|PART II       | Other
      Information                                                                     |   
|Item 1.       | Legal
      Proceedings                                                                     | 37
|Item
      2. | Unregistered Sales of Equity Securities and Use of
      Proceeds                           | 37
|Item 4.       | Submission of
      Matters to a Vote of Security Holders                                   | 37
|Item
      5. | Other Information                                                                           | 37
|Item 6.       | Exhibits                                                                                    | 37

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

---

PART 1  FINANCIAL INFORMATION

Item 1. Financial Statements

|CARBIZ INC.                                
|-------------------------------------------
|Condensed
      Consolidated Balance Sheets

|                                                                            |   | July
      31, 2009 |   |   | January 31, 2009 |  
|--------------------------------------------------------------------------- | - | ------------------- | - | - | ---------------- | -
|                                                                            |   | (unaudited)         |   |   |                  |  
|ASSETS                                                                      |   |                     |   |   |                  |  
|CURRENT                                                                     |   |                     |   |   |                  |  
|Cash and cash
      equivalents                                             | $ | 818,625             |   | $ | 674,624          |  
|Accounts receivable, net                                                    |   | 281,782             |   |   | 85,649           |  
|Current portion of
      notes receivable, net                              |   | 8,042,225           |   |   | 5,945,345        |  
|Current portion net investment in
      direct                              |   |                     |   |   |                  |  
|financing and sales-type leases                                             |   | 6,481,824           |   |   | -                |  
|Inventory                                                                   |   | 5,116,750           |   |   | 2,923,696        |  
|Prepaid and other
      assets                                              |   | 553,386             |   |   | 333,046          |  
|                                                                            |   | 21,294,592          |   |   | 9,962,360        |  
|NON-CURRENT                                                                 |   |                     |   |   |                  |  
|Notes receivable, less current portion                                      |   | 8,929,567           |   |   | 13,999,053       |  
|Net investment in
      direct financing and                                |   |                     |   |   |                  |  
|sales-type leases,
      less current portion                               |   | 4,997,213           |   |   | -                |  
|Deferred financing
      costs and prepaid interest                         |   | 4,019,712           |   |   | 625,197          |  
|Property plant and equipment, net                                           |   | 693,050             |   |   | 596,415          |  
|                                                                            | $ | 39,934,134          |   | $ | 25,183,025       |  
|                                                                            |   |                     |   |   |                  |  
|LIABILITIES                                                                 |   |                     |   |   |                  |  
|CURRENT                                                                     |   |                     |   |   |                  |  
|Accounts payable and
      accrued liabilities                              | $ | 3,841,360           |   | $ | 4,527,041        |  
|Notes Payable                                                               |   |                     |   |   |                  |  
|Line of credit                                                              |   | 5,355,684           |   |   | 36,696,175       |  
|Inventory floor
      plan                                                  |   | 5,830,135           |   |   | 4,596,590        |  
|Short Term                                                                  |   | 452,227             |   |   | -                |  
|Other Debt                                                                  |   | 756,771             |   |   | -                |  
|Related party                                                               |   | -                   |   |   | 200,000          |  
|Current portion of capital lease
      obligation                           |   | -                   |   |   | 2,620            |  
|Current portion of
      convertible debentures                             |   | 96,935              |   |   | 255,113          |  
|Derivative liabilities                                                      |   | 7,807,054           |   |   | 11,796,217       |  
|Deferred revenue                                                            |   | 153,240             |   |   | 1,985            |  
|                                                                            |   | 24,293,406          |   |   | 58,075,741       |  
|                                                                            |   |                     |   |   |                  |  
|NON-CURRENT                                                                 |   |                     |   |   |                  |  
|Line of credit, less
      current portion                                  |   | 15,833,763          |   |   | -                |  
|Convertible debenture, less current
      portion                           |   | 472,649             |   |   | 1,855,330        |  
|                                                                            |   |                     |   |   |                  |  
|                                                                            |   | 40,599,818          |   |   | 59,931,071       |  
|                                                                            |   |                     |   |   |                  |  
|COMMITMENTS AND CONTIGENCIES                                                |   | -                   |   |   | -                |  
|                                                                            |   |                     |   |   |                  |  
|STOCKHOLDERS' DEFICIENCY                                                    |   |                     |   |   |                  |  
|COMMON SHARES                                                               |   | 20,818,928          |   |   | 19,364,233       |  
|Unlimited shares authorized, 102,520,603 and 87,744,296 common
      shares |   |                     |   |  
|issued and outstanding at July 31, 2009 and January 31, 2009                |   |                     |   |   |                  |  
|ADDITIONAL PAID-IN CAPITAL                                                  |   | 7,727,647           |   |   | 6,788,937        |  
|ACCUMULATED OTHER COMPREHENSIVE LOSS                                        |   | (385,197            | ) |   | (385,197         | )
|ACCUMULATED DEFICIT                                                         |   | (28,827,062         | ) |   | (60,516,019      | )
|                                                                            |   | (665,684            | ) |   | (34,748,046      | )
|                                                                            | $ | 39,934,134          |   | $ | 25,183,025       |  

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

1

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

|                                            |   | For the three months ended |   |   | For the six months ended |  
|------------------------------------------- | - | -------------------------- | - | - | ------------------------ | -
|                                            |   | July 31,                   |   |   | July 31,                 |  
|                                            |   | 2009                       |   |   | 2008                     |  
|SALES                                       |   |                            |   |   |                          |  
|Used car sales                              | $ | 8,198,338                  |   | $ | 6,909,797                |  
|Used car sales from
      sales type leases |   | 2,577,323                  |   |   |                          |  
|Consulting and collection services          |   | 139,612                    |   |   | 412,942                  |  
|Interest and lease
      income             |   | 1,904,107                  |   |   | 1,461,209                |  
|                                            |   | 12,819,380                 |   |   | 8,783,948                |  
|COST OF SALES                               |   |                            |   |   |                          |  
|Used car costs                              |   | 6,901,427                  |   |   | 5,100,731                |  
|Consulting and
      collection services    |   | 386,850                    |   |   | 274,951                  |  
|                                            |   | 7,288,277                  |   |   | 5,375,682                |  
|GROSS PROFIT                                |   | 5,531,103                  |   |   | 3,408,266                |  
|                                            |   |                            |   |   |                          |  
|OPERATING EXPENSES                          |   |                            |   |   |                          |  
|Personnel expenses                          |   | 753,606                    |   |   | 654,486                  |  
|Selling expenses                            |   | 134,883                    |   |   | 202,928                  |  
|Professional fees                           |   | 253,798                    |   |   | 178,305                  |  
|Provision for credit
      losses           |   | 1,786,480                  |   |   | 2,403,110                |  
|Other operating expenses                    |   | 1,196,488                  |   |   | 1,086,190                |  
|                                            |   | 4,125,255                  |   |   | 4,525,019                |  
|OPERATING INCOME (LOSS)                     |   | 1,405,848                  |   |   | (1,116,753               | )
|                                            |   |                            |   |   |                          |  
|INTEREST AND OTHER EXPENSES                 |   | (1,060,237                 | ) |   | (1,877,114               | )
|GAIN (LOSS) ON DERIVATIVE LIABILITIES       |   | 4,709,781                  |   |   | 2,010,476                |  
|GAIN ON SALE OF SOFTWARE DIVISION           |   | -                          |   |   | 2,514,229                |  
|LOAN PORTFOLIO PURCHASE                     |   |                            |   |   |                          |  
|TRANSACTION COSTS                           |   | (637,500                   | ) |   | -                        |  
|GAIN ON EXTINGUISHMENT OF DEBT              |   | -                          |   |   | -                        |  
|NET INCOME FOR THE PERIOD                   | $ | 4,417,892                  |   | $ | 1,530,838                |  
|NET INCOME PER SHARE:                       |   |                            |   |   |                          |  
|Basic                                       | $ | 0.04                       |   | $ | 0.02                     |  
|Diluted                                     | $ | -                          |   | $ | 0.02                     |  
|WEIGHTED AVERAGE SHARES OUTSTANDING         |   |                            |   |   |                          |  
|Basic                                       |   | 102,520,603                |   |   | 65,809,853               |  
|Diluted                                     |   | 201,815,672                |   |   | 66,759,852               |  

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 Six Months Ended |  
|-------------------------------------------------------------- | - | ------------------------ | -
|                                                               |   | July
      31, 2009      |  
|NET INFLOW (OUTFLOW) OF CASH RELATED                           |   |                          |  
|TO THE FOLLOWING ACTIVITIES:                                   |   |                          |  
|OPERATING ACTIVITIES                                           |   |                          |  
|Net Income                                                     | $ | 31,688,957               |  
|Items not affecting
      cash:                                |   |                          |  
|Depreciation of property and equipment                         |   | 77,280                   |  
|(Gain) loss on derivative liabilities                          |   | 53,319                   |  
|Gain on
      sale of software operations                      |   | -                        |  
|Gain on extinguishment of debt                                 |   | (33,199,287              | )
|Amortization of deferred financing costs                       |   | 189,784                  |  
|Amortization of prepaid interest                               |   | 129,411                  |  
|Amortization of debt discount                                  |   | 636,161                  |  
|Share-based compensation                                       |   | 195,525                  |  
|Provision
      for credit losses                              |   | 3,375,526                |  
|Net changes in
      operating assets and liabilities:         |   |                          |  
|Accounts
      receivable                                      |   | (196,132                 | )
|Notes receivable                                               |   | 2,448,413                |  
|Net
      investment in direct financing and sales-type leases |   | (12,328,236              | )
|Prepaids and other assets                                      |   | (220,340                 | )
|Inventory                                                      |   | (2,193,054               | )
|Deferred costs                                                 |   | -                        |  
|Accounts
      payable and accrued liabilities                 |   | (659,281                 | )
|Deferred revenue                                               |   | 151,255                  |  
|NET CASH FLOWS FROM OPERATING
      ACTIVITIES                 |   | (9,850,699               | )
|INVESTING ACTIVITIES                                           |   |                          |  
|Proceeds from sale of software
      operations                |   | -                        |  
|Acquisition of Star
      Financial assets                     |   | (7,921,997               | )
|Acquisition of property and equipment                          |   | (163,915                 | )
|NET CASH FLOWS FROM
      INVESTING ACTIVITIES                 |   | (8,085,912               | )
|FINANCING ACTIVITIES                                           |   |                          |  
|Repayment of capital
      leases                              |   | (2,620                   | )
|Proceeds from line of credit, net                              |   | 6,401,904                |  
|Payments on term loan
      financing                          |   | (5,646,589               | )
|Proceeds under term loan financing                             |   | 16,428,637               |  
|Repayment of
      convertible debentures                      |   | -                        |  
|Repayment of related party debt                                |   | (200,000                 | )
|Proceeds from exercise
      of warrants                       |   | 1,099,280                |  
|NET CASH FLOWS FROM FINANCING
      ACTIVITIES                 |   | 18,080,612               |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                        |   |                          |  
|AND CASH EQUIVALENTS                                           |   | -                        |  
|INCREASE (DECREASE) IN CASH AND                                |   |                          |  
|CASH EQUIVALENTS                                               |   | 144,001                  |  
|CASH AND CASH EQUIVALENTS,                                     |   |                          |  
|BEGINNING OF PERIOD                                            |   | 674,624                  |  
|CASH AND CASH EQUIVALENTS,                                     |   |                          |  
|END OF PERIOD                                                  | $ | 818,625                  |  

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

3

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|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|1. | BASIS OF PREPARATION AND SUMMARY OF
      ACCOUNTING POLICIES
|-- | -------------------------------------------------------------

The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States (GAAP) for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the results of operations for
the periods presented have been included. Operating results for the six months
ended July 31, 2009 and 2008 are not necessarily indicative of the results that
may be expected for the fiscal year. The balance sheet at January 31, 2009 has
been derived from the audited financial statements at that date, but does not
include all of the information and footnotes required by GAAP for complete
financial statements.

You should read these condensed
consolidated financial statements together with the historical consolidated
financial statements of the Company for the years ended January 31, 2009, and
2008, included in our Annual Report on Form 10-K for the year ended January 31,
2009, filed with the Securities and Exchange Commission (SEC) on April 24,
2009 (the Annual Report).

References to the Company or Carbiz
include the Companys consolidated subsidiaries. All dollar figures presented in
the condensed consolidated financial statements are denominated in U.S. dollars
unless otherwise indicated.

Accounts, notes receivable and net
investment in direct financing and sales-type leases

Accounts receivable, notes receivable
and net investment in direct financing and sales-type leases (referred to as
lease receivables) consist of balances due from customers related to
consulting and collections services and the sale or leasing of used automobiles.
They are presented in the condensed consolidated balance sheet net of an
allowance for credit losses. Accounts receivables typically have terms of net 30
days. Notes and lease receivables have remaining terms of 12 to 60 months
requiring weekly, bi-weekly or monthly payments. For note receivables, interest
is calculated weekly based on the outstanding balance. For lease receivables,
the interest is imputed in the lease payments.

Allowance for credit losses and
concentration of credit risk

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

The Company initiates steps to pursue
collection of payments for notes or lease receivables upon the customers first
missed payment. Initial steps may include contacting the customer via telephone,
performing a field visit to the customers work or home, or activating the
automobiles onboard starter disrupt system. When the initial steps are not
successful, the Company takes steps to repossess the automobile. Once the
automobile is in the Companys possession, the vehicle is liquidated and the
associated receivable account is charged off at the expiration of the applicable
States statutory notice period for repossessed accounts, which is usually from
0 to 30 days long. In situations where the Company has been unable to
successfully repossess the automobile, the account is written off immediately.
When a customers account becomes severely delinquent (usually 14 days for
weekly pay accounts, 30 days for bi-weekly pay accounts and 60 days for monthly
pay accounts), the Company suspends accrual of interest income. Notes and lease
receivables for accounts held in repossession are fully reserved for in the
allowance for credit losses.

4

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|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

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

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

For accounts where the automobile was
repossessed, the difference between the loan or lease balance and the fair value
of the repossessed automobile (based on the average wholesale selling price at
auction) is charged to the allowance for credit losses. Generally, repossessed
automobiles are sold at auction. On average, accounts are approximately 60-90
days past due at the time of write-off. For previously written-off accounts that
are subsequently recovered, the amount of such recovery is credited to the
allowance for credit losses.

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

Inventory

Inventory consists of used vehicles and
is stated at the lower of cost or net realizable value. Cost is determined on a
specific item basis.

Net Income per share

Net Income per share was computed based
on the following basic and diluted weighted average common shares
outstanding:

| |                                                      |   | Three months ended July 31, |   |   | Six months ended July 31, | 
| | ---------------------------------------------------- | - | --------------------------- | - | - | ------------------------- | 
| |                                                      |   | 2009                        |   |   | 2008                      | 
| | Net income attributable to common
      stockholders | $ | 4,417,892                   |   | $ | 1,530,838                 | 
| | Basic:                                               |   |                             |   |   |                           | 
| | Weighted average shares
      outstanding            |   | 102,520,603                 |   |   | 65,809,853                | 
| | Net income per common share - basic                  | $ | 0.04                        |   | $ | 0.02                      | 
| | Diluted:                                             |   |                             |   |   |                           | 
| | Net income attributable to common stockholders       | $ | 4,417,892                   |   | $ | 1,530,838                 | 
| | Adjustments to Net Income                            |   | (4,191,458                  | ) |   |                           | 
| | Adjusted net income                                  | $ | 226,434                     |   | $ | 1,530,838                 | 
| | Weighted average shares
      outstanding - basic    |   | 102,520,603                 |   |   | 65,809,853                | 
| | Effect of dilutive securities                        |   | 99,295,069                  |   |   | 949,999                   | 
| | Adjusted weighted average share                      |   | 201,815,672                 |   |   | 66,759,852                | 
| | Net Income per common share (diluted)                | $ | 0.00                        |   | $ | 0.02                      | 

5

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|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

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

The effects of 6,237,891 stock options,
1,397,488 common stock warrants, 2,040,000 non-vested shares from an incentive
stock grant and 41,250,089 shares indexed to the derivative liabilities
outstanding have been excluded from dilutive securities for the six months ended
July 31, 2009, as their effect would be anti-dilutive. In addition, 8,438,041
options and 31,923,604 warrants have been excluded from dilutive securities for
the six months ended July 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. FAS 157 describes three levels of inputs that may
be used to measure fair value as follows:

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

The following table summarizes the
level of inputs used to measure certain financial instruments at fair value on a
recurring basis as of July 31, 2009:

| |                |   | Fair Value Measurements Using | 
| | -------------- | - | ----------------------------- | 
| |                |   | Level 1                       | 
| |                |   |                               | 
| | Derivative     |   |                               | 
| | liabilities at |   |                               | 
| | July 31, 2009  | $ | --                            | 

The following represents a
reconciliation of the changes in fair value of financial instruments measured at
fair value on a recurring basis using significant unobservable inputs (Level 3)
during the six months ended July 31, 2009:

Beginning balance: Derivative financial
      instruments
    $
    11,796,217Total (gains) losses
    
    (53,319
    )Purchases, sales, issuances and
      settlements, net)(4,042,482
    )Ending balance
    $
    7,807,054


Revenue recognition

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

| | (1) | Used automobile sales:                                                                                                                                                                                                                                                                                                                          
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company recognizes revenue on the sale of automobiles
      upon execution of the sales contract, the customer taking possession of
      the automobile, and financing having been approved. Customers are required
      to meet certain underwriting guidelines in order to obtain financing of
      the automobile through the Company.
| |     |                                                                                                                                                                                                                                                                                                                                                 
| | (2) | Used automobile leases:                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company recognizes revenue on the lease of
      automobiles upon execution of the lease contract, the customer taking
      possession of the automobile, and lease financing having been approved.
      Customers                                                                                                                        

6

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

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

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

Lease transactions

To qualify for financing under the new
DSC financing agreement (see note 3), the Company converted a number of existing
finance note receivables to lease receivables in February 2009. The Company
considered these transactions to be direct financing leases and accounted for
the leases including the minimum lease payments and the unguaranteed residual
value as the gross investment in the lease. The difference between this gross
investment and the cost or carrying amount was recorded as unearned income. The
unearned income and initial direct costs are being amortized to income over the
lease term so as to produce a constant periodic rate of return on the net
investment in the lease. The difference between the original finance note
receivable and the new lease total of payments was recorded as a period expense
and charged to income (see note 3). The sales tax and title fees costs related
to this conversion were also taken as a period expense.

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

Transfer of Financial Assets

From time to time during the six months
ending July 31, 2009 the Company has sold portions of its previously generated
and recently acquired financed note receivable portfolio. All portfolio sales
during this period have met the requirements for a sale and the Company did not
retain the right to service or collect those loans.

Use of estimates

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

7

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

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

Deferred finance costs

Deferred finance costs include the fair
value of warrants issued to an existing lender in conjunction with the issuance
of the Wells Fargo Preferred Credit line of credit. They will be amortized over
the term of the respective financing arrangement. Approximate future
amortization of deferred finance costs is as follows as of July 31, 2009:

Years ending July 312010
    $
    1,348,2432011
    
    730,298$
    2,078,541


Prepaid interest

Prepaid interest included the initial
interest recorded in conjunction with the issuance of the Wells Fargo Preferred
Credit line of credit and is amortized over the term of the respective financing
arrangement. Such amount was determined by comparing the cost of the acquired
portfolio and other assets to the fair value of such assets acquired, and the
difference was recognized as prepaid interest (see Note 8). Approximate future
amortization of prepaid interest is as follows as of July 31, 2009:

Years ending July 312010
    $
    1,035,2912011
    
    905,880$
    1,941,171


Subsequent events

Management has considered all
subsequent events through the date of filing of the report with the SEC.

Effect of recent accounting
pronouncements

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

In April 2009, the FASB issued FSP
115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments (FSP 115-2 and 124-2). FSP 115-2 and 124-2 amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities to
make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements. FSP 115-2 and 124-2 is effective for fiscal years and
interim periods beginning after June 15, 2009. Management is reviewing this
pronouncement to determine its affect, if any, on the Companys Consolidated
Financial Statements.

8

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|1. | BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING
      POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In April 2009, the FASB issued FSP 157-4, Determining
      Fair Value When the Volume and Level of Activity for the Asset or
      Liability Have Significantly Decreased and Identifying Transactions That
      are Not Orderly (FSP 157-4). FSP 157-4 provides additional guidance for
      estimating fair value in accordance with FASB Statement No. 157 when the
      volume and level of activity for both financial and nonfinancial assets or
      liabilities have significantly decreased. FSP 157-4 is effective for
      fiscal years and interim periods beginning after July 1, 2009 and shall be
      applied prospectively. Early adoption for periods ending before March 15,
      2009 is not permitted. Management is reviewing this pronouncement to
      determine its affect, if any, on the Companys Consolidated Financial
      Statements.                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In May 2009, the FASB issued Statement No. 165,
      Subsequent Events, which provides guidance establishing standards for
      disclosure of events that occur after the balance sheet date but before
      financial statements are issued. The Statement is effective for fiscal
      years and interim periods ending after June 15, 2009, and shall be applied
      prospectively. The Company has included all disclosures required by this
      standard in these Condensed Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In June 2009, the FASB issued Statement No. 166,
      Accounting for Transfers of Financial Assets, which provides guidance to
      improve the relevance, representational faithfulness, and comparability of
      the information that a reporting entity provides in its financial
      statements about a transfer of financial assets; the effects of a transfer
      on its financial position, financial performance, and cash flows; and a
      transferors continuing involvement, if any, in transferred financial
      assets. The Statement is effective for fiscal years ending after November
      15, 2009, and shall not be applied prospectively. Management is reviewing
      this pronouncement to determine its affect, if any, on the Companys
      Consolidated Financial Statements.                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In June 2009, the FASB issued Statement No. 168, The FASB
      Accounting Standards Codification,which will become the source
      of authoritative U.S. generally accepted accounting principles (GAAP)
      recognized by the FASB to be applied by nongovernmental entities. Rules
      and interpretive releases of the Securities and Exchange Commission (SEC)
      under authority of federal securities laws are also sources of
      authoritative GAAP for SEC registrants. On the effective date of this
      Statement, the Codification will supersede all then- existing non-SEC
      accounting and reporting standards. All other non-grandfathered non-SEC
      accounting literature not included in the Codification will become
      non-authoritative. This Statement is effective for financial statements
      issued for interim and annual periods ending after September 15,
    2009.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2. | LIQUIDITY AND MANAGEMENTS PLANS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | As of July 31, 2009, the Company had $818,625 in cash and
      cash equivalents. The Company has incurred significant net losses and
      negative cash flows from operations in each of the two years ended January
      31, 2009, however, during the six months ended July 31, 2009, the Company
      recorded $31.7 million net income, which includes a $33.2 million gain on
      the extinguishment of debt. As of July 31, 2009, the Company had a
      stockholders deficit of $665,684 versus $34.7 million at January 31,
      2009.                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In February 2009, the Company completed a restructuring
      of floor plan and receivables debt held by SWC Services LLC (SWC) with
      Dealer Services Corporation (DSC). The restructured debt agreement
      provides the Company with a maximum credit facility of $19.5 million for
      floor plan and lease financing. Although the Company had approximately
      $43.3 million of outstanding notes payable as of January 31, 2009,
      effective February 20, 2009, the Company was only obligated to repay $12.0
      million of this amount due to the debt restructuring. The $12.0 million is
      payable in installments over the next 24 months and is included in the
      aforementioned new credit facility.                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | On June 15, 2009, the Company obtained a revolving line
      of credit with Wells Fargo Preferred Capital for up to $20 million that
      will provide capital based upon the Companys eligible financed notes
      receivable. The line of credit is a 2 year commitment and interest is
      payable monthly.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

9

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|2. | LIQUIDITY AND MANAGEMENTS PLANS
      (continued)
|-- | --------------------------------------------------

During the six months ending July 31,
2009, a board member warrant holder exercised 11,762,351 common stock warrants
with proceeds to the company of $1,099,280.

With the Companys new financing
agreements in place and our existing cash and cash equivalents are believed by
management to be sufficient to finance planned operations, debt repayment
obligations and capital expenditures through the second quarter of fiscal year
2012, but in order to proceed with the Companys current expansion plan for
operations in the Buy-Here-Pay-Here and Lease-Here-Pay-Here industries,
additional capital may be required. The Companys ability to arrange such
financing in the future will depend in part upon the prevailing capital market
conditions as well as business performance. There can be no assurance that the
Company will be successful in these efforts to arrange additional financing, if
needed, on terms satisfactory to it or at all. Available resources may be
consumed more rapidly than currently anticipated, resulting in the need for
additional funding sooner than anticipated. The failure to obtain adequate
financing could result in a substantial curtailment of the Companys operations.
Accordingly, the Company anticipates that it may be required to raise additional
capital through a variety of sources, including:

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

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

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

The average net balance of outstanding
note receivables and investment in direct financing and sales-type leases were
approximately $28.7 million and $24 million during the six months ended July 31,
2009 and 2008, respectively. The Company earned approximately $3.4 million and
$3.3 million of interest and lease income on note and lease receivables with an
average yield of 20.10% and 21.00% during the six months ended July 31, 2009 and
2008, respectively. Those amounts have been included as interest and lease
income within revenues in these Condensed Consolidated Financial Statements. The
Company paid an average effective interest rate of 16.24% to finance the notes
receivable and net investment in direct financing and sales-type lease balances
during both the six months ended July, 31 2009 and 2008.

10

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

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

Accounts, notes receivable and
investment in direct financing and sales-type leases consist of the
following:

| |                                   |   | Active Account Balances as of July 31, 2009 |  
| | --------------------------------- | - | ------------------------------------------- | -
| |                                   |   |                                             |  
| |                                   |   | Active                                      |  
| |                                   |   | Accounts                                    |  
| | Accounts receivable               | $ | 243,727                                     |  
| | Less: Allowance for credit losses |   | (2,945                                      | )
| |                                   | $ | 240,782                                     |  
| |                                   |   |                                             |  
| | Notes receivable                  | $ | 21,358,580                                  |  
| | Investment in direct financing    |   |                                             |  
| | and sales-type
      leases       |   | 13,866,261                                  |  
| | Less: Allowance for credit losses |   | (6,774,012                                  | )
| |                                   | $ | 28,450,829                                  |  
| |                                   |   |                                             |  
| | Notes receivable, net :           |   |                                             |  
| | Current                           | $ | 8,042,225                                   |  
| | Non-current                       |   | 8,929,567                                   |  
| |                                   |   |                                             |  
| | Investment in direct financing    |   |                                             |  
| | and sales-type
      leases, net  |   |                                             |  
| | Current                           |   | 6,481,824                                   |  
| | Non-current                       |   | 4,997,213                                   |  
| |                                   | $ | 28,450,829                                  |  

| |                     |  | Number of Accounts as of July 31, 2009 | 
| | ------------------- |  | -------------------------------------- | 
| | Accounts Receivable |  | 50                                     | 
| | Notes               |  | 3321                                   | 
| | Leases              |  | 2329                                   | 

Notes receivable and net investment in
direct financing and sales-type leases have an average remaining portfolio life
of 29 and 21 months, respectively.

The components of the net investment in
direct financing and sales-type leases at July 31, 2009 are as follows:

Total future minimum lease payments
    
    15,099,757Unguaranteed residual value
    
    3,312,058Unearned income
    
    (4,084,624
    )Gross net investment in direct financing and sales-type
      leases
    
    14,327,191Loss allowance for credit losses
    
    (2,848,154
    )11,479,037


The average remaining life for the
lease portfolio is 21 months, and the future expected maturities are
approximately $6.5 million during this year and $5.0 million the following
year.

11

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

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

Allowance for credit loss activity is
as follows for the six months ended July 31, 2009

| |                                                 |   | Used Car         |   |   | Consulting and | 
| | ----------------------------------------------- | - | ---------------- | - | - | -------------- | 
| |                                                 |   | Sales and Leases |   |   | Collections    | 
| | January 31, 2009                                | $ | 6,250,031        |   | $ | 1,093          | 
| | Provision for credit losses                     |   | 1,589,046        |   |   | -              | 
| | Write-offs of
      gross notes receivable      |   | (812,989         | ) |   | -              | 
| | Fair value of repossessed
      vehicles        |   | 327,131          |   |   | -              | 
| | Recoveries of
      notes receivable            |   | 3,744            |   |   | -              | 
| | April 30, 2009                                  |   | 7,356,963        |   |   | 1,093          | 
| | Provision for
      credit losses               |   | 1,763,898        |   |   | 22,582         | 
| | Write-offs of notes and lease
      receivables |   | (963,993         | ) |   |                | 
| | Fair value of
      repossessed vehicles        |   | 201,358          |   |   |                | 
| | Recoveries of notes receivable                  |   | 280,872          |   |   |                | 
| | July 31, 2009                                   | $ | 8,639,098        |   | $ | 23,675         | 

|4. | CREDIT FACILITIES
|-- | -----------------

Dealer Services Corporation

On January 16, 2009, the Company
entered into an Asset Purchase Agreement with Dealer Services Corporation
(DSC) and the Chapter 7 Trustee of SWC Services LLC (SWC Trustee). Pursuant
to the agreement, DSC agreed to purchase all of the rights and interest of SWC
under the Companys loan agreement with SWC for $12 million.

In connection therewith, DSC agreed to
forgive all of the outstanding balance due by the Company under the SWC Loan
Agreement in excess of $12,000,000. On February 20, 2009, the Asset Purchase
Agreement was consummated when the Company had a total balance of approximately
$43.3 million outstanding under the SWC credit facilities. DSC forgave
approximately $31.3 million dollars worth of that debt and executed a $14
million new credit facility (New Loan Agreement), $12 million of which
represented the then remaining balance due under the SWC Loan Agreement.

Pursuant to that New Loan Agreement,
the Company had to convert a number of outstanding notes receivable due by the
Company from consumers into closed-end leases. The Company delivered to DSC a
set of conversion documents, consisting of a signed closed-end lease and a bill
of sale for each vehicle.

The Company incurred costs of
approximately $4.6 million in connection with the conversion of these notes
receivable, which included customer incentives, sales tax payments, and license
and title fees.

All of the financial covenants
contained in the prior loan agreement have been deleted from the New Loan
Agreement and replaced by an obligation for the Company to maintain a minimum of
$3,500,000 of accounts receivable. As was the case under the previous loan
agreement, the obligation of the Company and its operating subsidiaries to pay
all amounts due under the New Loan Agreement is secured by a pledge to DSC of
all of the assets of the Company and its operating subsidiaries, The Company
also paid DSC a loan origination fee of $120,000 and a commitment fee of
$250,000 in addition to issuing DSC warrants to purchase 9,718,289 shares of the
Companys common stock at a purchase price of $.03 per share. The warrants will
expire on February 28, 2014.

12

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|4. | CREDIT FACILITIES (continued)
|-- | -----------------------------

The Company has agreed to enter into a
registration rights agreement on or before December 31, 2010, pursuant to which
the Company will be required to register for resale by DSC the shares to be
issued to DSC under the warrants, and to use its commercially reasonable efforts
to obtain all necessary consents to enter into such agreement.

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

In connection with entering into the
Asset Purchase Agreement and the New Loan Agreement, Trafalgar Capital
Specialized Investment Fund, Luxembourg, the holder of the Companys convertible
debentures (see note 5), consented to the execution and delivery of the New Loan
Agreement, which consent was required by a subordination and inter-creditor
agreement with Trafalgar.

On February 25, 2009, the Company, its
operating subsidiaries and DSC further amended and restated the New Loan
Agreement to provide for the inclusion of five new Carbiz subsidiaries in the
credit facility. Four of these subsidiaries have been formed to carry out the
business of the Company in Indiana and one has been formed to carry out the
business of the Company in Nebraska. Under this amendment and the promissory
notes executed by the operating subsidiaries thereunder, the amount of available
credit was expanded from $14 million to $19.5 million.

As with the New Loan Agreement,
Trafalgar also consented to this amendment since such consent was similarly
required by the Trafalgar subordination and inter-creditor agreement.

Since all of the aforementioned events
relate directly to the debt forgiveness, all of the costs associated therewith
have been recognized as an adjustment of the gain on debt extinguishment, as
follows:

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


The DSC debt has an effective interest
rate of approximately 21.94%, and principal and interest are payable monthly.
Amounts due to DSC are collateralized by all of the Companys assets and the
Chairman of the Boards stock in the Company.

13

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|4. | CREDIT FACILITIES (continued)
|-- | -----------------------------

Wells Fargo Preferred
Capital

On June 15, 2009, all of the Company's
subsidiaries that are borrowers under the Fourth Amended and Restated Loan and
Security Agreement with DSC, dated February 25, 2009 (the "DSC Loan Agreement"),
entered into an amendment to the DSC Loan Agreement with DSC, which permits the
Company's subsidiaries to enter into the Well Fargo Loan Agreement (the "WF Loan
Agreement") and grant Wells Fargo Preferred Capital ("Wells Fargo") a security
interest in their personal property.

All of the Company's direct and
indirect subsidiaries entered into the WF Loan Agreement dated June 15, 2009
with Wells Fargo Preferred Capital, Inc. Under the WF Loan Agreement, Wells
Fargo committed to loan the Company up to (i) $15,000,000 through and including
December 31, 2009, (ii) $17,000,000 commencing January 1, 2010 through and
including March 31, 2010 and (iii) $20,000,000 thereafter. The purpose of the
credit facility is to finance receivables generated by the Company from the
sales of used vehicles. The Company may borrow up to 55% of the outstanding
amount due under eligible receivables, as defined in the WF Loan Agreement,
other than receivables acquired from Star Financial Services (Star see Note
8). With respect to the receivables acquired from Star Financial Services in
June 2009, they may borrow up to 95% of the amount outstanding under such
receivables through the 60th day following the date of the WF Loan Agreement and
90% thereafter.

In order to obtain the consent of DSC
to the WF Loan Agreement, DSC requested that the Company issue to DSC warrants
to purchase an additional 30,781,800 shares of Company common stock at a
purchase price of $0.08 per share at any time until June 15, 2014. The Company's
board of directors approved such issuance, finding that the WF Loan Agreement
was necessary for the future growth of the Company.

In connection with entering into the WF
Loan Agreement, Wells Fargo entered into an Inter-creditor Agreement with DSC
and a Subordination and Inter-creditor Agreement with Trafalgar Capital
Specialized Investment Fund, Luxembourg and the Star note holders.

The WF Loan Agreement is subject to
certain borrowing limitations, and includes certain financial and restrictive
covenants, including but not limited to covenants requiring the maintenance of
minimum Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
and debt to equity ratios. The credit facility will expire on June 30, 2011.

Loans will bear interest at an annual
rate equal to the three-month London Interbank Offered Rate plus 3.35%, (3.95%
at July 31, 2009) and an unused line fee of 0.25% per annum is charged on the
unused portion of the credit facility on a monthly basis. The Company must pay
Wells Fargo an administrative fee of $1,000 per month.

Amounts due to Wells Fargo under the WF
Loan Agreement are secured by a security interest in all of the personal
property of the Company, and guaranteed by the Company under a Guaranty
Agreement.

The Companys initial draw under the WF
Loan Agreement was $10,303,665, $8,153,665 of which was used to pay the
indebtedness of Star to Wells Fargo.

14

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|4. | CREDIT FACILITIES (continued)
|-- | -----------------------------

The balance outstanding under the DSC
and Wells Fargo loan facilities at July 31, 2009 are comprised of the
following:

Current
    
    
    Long-TermLiabilities
    
    
    LiabilitiesWF Line of credit
    $
    -
    
    $
    11,616,397DSC line of credit
    
    5,355,684
    
    
    4,217,366DSC inventory floor plan
    
    5,830,135
    
    
    -Short term notes
    
    452,227
    
    
    -Other debt
    
    756,771
    
    
    -Total
    $
    12,394,817
    
    $
    15,833,763


|5. | CONVERTIBLE DEBENTURES                                                    
|-- | --------------------------------------------------------------------------
|   |                                                                           
|   | Convertible debentures consist of the following as of
      July 31, 2009:

Convertible debentures, at face valueMaturing through September 2010
    $
    5,829,013Maturing December 1, 2010
    
    35,0375,864,050Less: unamortized discount
    
    (5,294,466
    )$
    569,584Current
    $
    96,935Long-term
    
    472,649$
    569,584


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

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

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

15

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|5. | CONVERTIBLE DEBENTURES (continued)                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                       
|   | During the six months ended July 31, 2009, the Company
      issued 11,073,419 and 1,599,494 shares of common stock in connection with
      the exercise of warrants and the conversions of convertible debentures,
      respectively, for which $888,310 and $199,419 of related derivative
      liability was credited to equity.
|   |                                                                                                                                                                                                                                                                                                                                       
|6. | DERIVATIVE LIABILITIES                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                       
|   | Fair values of derivative liabilities at July 31, 2009
      were as follows:                                                                                                                                                                                                                                                         

Number ofIndexedCommonBalance
    
    
    SharesCompound Embedded Derivatives associated
      with:Convertible debentures, $5,000,000original face value; $5,829,013face
      value plus accruedinterest as of July 31, 2009;Due
      September 2010
    $
    4,597,069
    
    
    94,001,297Convertible debentures, $800,000 originalface value; $35,037 facevalue plus accrued interest as ofJuly 31, 2009; due December 2010
    
    30,178
    
    
    600,361Warrant Liabilities Expiring:October 2009
    
    38,123
    
    
    8,417,777October 2010
    
    43,236
    
    
    776,468April 2011
    
    17,501
    
    
    314,294October 2011
    
    40,658
    
    
    876,200February 2014
    
    808,759
    
    
    10,468,289June
      2014
    
    2,231,530
    
    
    30,781,800$
    7,807,054
    
    
    146,236,486


The Company estimated the fair value of
the compound derivative on the inception dates, and subsequently, using the
Monte Carlo Simulation valuation technique, because that technique embodies all
of the assumptions (including credit risk, interest risk, stock price volatility
and conversion behavior estimates) that are necessary to fair value complex
compound derivative instruments.

16

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|6. | DERIVATIVE LIABILITIES (continued)                                                                                                                                                                                                                                 
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                    
|   | Information and significant assumptions embodied in the
      Companys valuations (including ranges for certain assumptions during the
      subject periods that instruments were outstanding) as of July 31, 2009 are
      illustrated in the following tables:

| |                                                                                 | Compound           
| | ------------------------------------------------------------------------------- | -------------------
| |                                                                                 | Embedded Derivative
| | $5,829,013 face value secured convertible
      debentures due September, 2010: |                    
| | Conversion price                                                                | $0.064             
| | Volatility                                                                      | 102.68%  316.40%  
| | Equivalent term (years)                                                         | 0.085  1.092      
| | Credit-risk adjusted yield                                                      | 12.66%  14.23%    
| | Interest-risk adjusted rate                                                     | 12.00%  16.20%    
| | Dividends                                                                       | --                 
| |                                                                                 |                    
| | $35,037 face value secured convertible
      debentures due December, 2010:     |                    
| | Conversion price                                                                | $0.064             
| | Volatility                                                                      | 119.42%  316.40%  
| | Equivalent term (years)                                                         | 0.161  1.119      
| | Credit-risk adjusted yield                                                      | 12.66%  14.23%    
| | Interest-risk adjusted rate                                                     | 11.00%  13.20%    
| | Dividends                                                                       | --                 

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

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

| |                               |   | Three Months Ended |  |   | Six Months Ended | 
| | ----------------------------- | - | ------------------ |  | - | ---------------- | 
| |                               |   | July 31,           |  |   | July 31,         | 
| |                               |   | 2009               |  |   | 2008             | 
| | Compound embedded derivatives | $ | 4,191,458          |  | $ | 460,961          | 
| | Warrant derivatives           |   | 518,323            |  |   | 1,549,515        | 
| |                               | $ | 4,709,781          |  | $ | 2,010,476        | 

|7. | STOCKHOLDERS EQUITY                                                             
|-- | ---------------------------------------------------------------------------------
|   |                                                                                  
|   | Stock options and incentive stock grants                                         
|   |                                                                                  
|   | Stock option activity for the six months ended July 31,
      2009 is as follows:

Number
    
    Weighted AverageOf
      Options
    
    Exercise Price (*)Outstanding, February 1, 2009
    
    7,421,891
    
    $ 0.15Options granted during the period
    
    -
    
    -Options cancelled during the period
    
    (1,184,000
    )
    0.28Options exercised
      during the period
    
    -
    
    -Outstanding, July 31, 2009
    
    6,237,891
    
    $ 0.15


At July 31, 2009, the outstanding stock
options had no aggregate intrinsic value.

17

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|7. | STOCKHOLDERS EQUITY (continued)
|-- | --------------------------------

Stock options outstanding and
exercisable as of July 31, 2009 are as follows:

July 31, 2009Options Outstanding
    Options ExercisableExercise
    
    Weighted
    
    WeightedPrice
    Number
    Average Life (Yrs)
    Number
    Average Life (Yrs)0.13
    5,600,000
    2.46
    2,240,000
    2.460.21
    637,891
    0.33
    637,891
    0.336,237,891
    2.24
    2,877,891
    1.99


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

During the six months ended July 31,
2009 and 2008, the Company recognized share-based compensation expense of
$50,400 and $36,179, respectively for stock options granted to employees, and
$64,600 and $39,000, respectively, for incentive stock granted to employees and
directors and $0, and $47,511, respectively 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.

A summary of the Companys non-vested
stock options as of July 31, 2009, and changes during the six months then ended,
is summarized as follows:

SharesNon-vested at February 1, 2009
    
    3,360,000Granted
    
    -Vested
    
    -Forfeited/Cancelled
    
    -Non-vested at July 31, 2009
    
    3,360,000


At July 31, 2009, the options had a
weighted average grant date fair value of $0.09 and no intrinsic value.

As of July 31, 2009, there was
approximately $248,920 of unrecognized compensation cost related to non-vested
stock options granted. These costs will be expensed over the next two years and
six months.

On January 25, 2007, the Company
awarded 3,400,000 common shares as restricted stock to certain directors,
officers, and key employees of the Company of which 1,360,000 shares have been
vested as of July 31, 2009.

Warrants classified as
equity

The Company has granted warrants to
purchase shares of common stock. Warrants outstanding and exercisable at July
31, 2009 are as follows:

Weighted AverageNumber
    Remaining
    Weighted AverageExercise Prices
    Outstanding
    Contractual Life (Years)
    Exercise Price$0.01
    144,334
    1.16
    $ 0.01$0.08
    10,000,000
    2.56
    $ 0.08$0.10
    144,334
    1.16
    $ 0.10$0.15
    194,334
    1.16
    $ 0.15$0.15
    1,000,000
    1.58
    $ 0.15$0.20
    194,334
    1.16
    $
      0.2011,667,336
    2.39
    $ 0.09


See Note 6 for summary of warrants
classified as liabilities.

18

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|7. | STOCKHOLDERS EQUITY (continued)
|-- | --------------------------------

Conversion of Trafalgar convertible
debentures

During the six months ended July 31,
2009, the Company issued 980,392 shares of common stock at a conversion price of
$0.08 in a Trafalgar Convertible Debenture conversion.

Conversion of October 1, 2007
related party convertible debentures

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

Exercise of related party
warrants

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

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

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

Unregistered shares issued to
officers and directors for directors fees

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

Unregistered shares issued under
cross marketing agreement

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

Additional warrants issued to
DSC

On June 15, 2009, the Company issued to
DSC warrants to purchase 30,781,800 shares of the companys stock at a purchase
price of $0.08 per share. The warrants will expire on June 15, 2014. The Company
has agreed to enter into registration rights agreements similar to the warrants
previously issued to DSC. See Note 4. The fair value of these warrants on date
of issuance was $2,247,071 which was charged to deferred financing costs at that
time and is being amortized over the remaining term of the DSC credit facility.
The previously issued warrants were charged as an adjustment of the gain on debt
extinguishment. See Note 4. These warrants were also considered to be derivative
liabilities and are adjusted quarterly to their estimated fair values. See Note
6.

19

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|8. | STAR FINANCIAL PORTFOLIO ACQUISITION
|-- | ------------------------------------

On June 15, 2009, the Company completed
its acquisition of the certain assets of Star Financial Services (Star), which
included a portfolio of approximately 1500 used automobile and light truck
loans. The consideration paid by the Company to Star consisted of approximately
$8,154,000 in cash and the assumption of Stars related party debt of
approximately $757,000. In conjunction and simultaneously with the Star
acquisition, the Company also entered into an agreement with Wells Fargo
Preferred Capital, Inc (WFPC) for a secured revolving line of credit (see Note
4). The line of credit was used to fund the purchase of Stars assets and to pay
for the transactions costs of $637,500, which were expensed in the current
period and on the face of the Statement of Operations under Loan portfolio
purchase transaction costs.

The total purchase price has been
allocated to assets acquired based on managements best estimate of fair value,
and are as follows:

Fair Values atJune
      15, 2009Cash
    $
    231,666Notes receivable, net
    
    6,598,187Prepaid Interest
    
    2,070,582Other assets
    
    10,000Total assets
    $
    8,910,436WFPC line of credit
    $
    8,153,665Star related party debt
    
    756,771Total liabilities
    $
    8,910,436


The estimated value of Notes Receivable
was based upon their expected collections net of reserves for uncollectible
accounts and unearned interest. The gross notes receivable acquired was
$9,554,446, the unearned interest was $663,192 and the allowance for credit
losses was $2,293,067. These notes bear interest at rates approximating market
rates for loans with similar credit characteristics and are similar in nature to
the Companys existing loans. The Company uses the same credit loss methodology
as it uses for its own finance receivables in determining the required credit
loss allowance.

The difference between the fair value
of the acquired assets and the purchase price has been recorded as prepaid
interest in light of the significantly below market interest rate on the WFPC
loan, which was used to finance the acquisition of the loan portfolio (see Note
4). Wells Fargo had been the asset based lender to Star Financial Services and
were instrumental in effecting the asset purchase transaction.

20

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|9. | SEGMENT INFORMATION
|-- | -------------------

The Company operates and manages its
business in two segments, which are its used car sales and leasing segment
(CarBiz Auto Credit) and consulting and collections services offered to
independent car dealerships (Consulting and Collections). For the previous
period, the Consulting and Collections segment was named Software and Other
Products.

| | Three months ended July 31, |   |             |  |   | 2009           |   |   |            |  
| | --------------------------- | - | ----------- |  | - | -------------- | - | - | ---------- | -
| |                             |   | Carbiz      |  |   | Consulting and |   |   |            |  
| |                             |   | Auto Credit |  |   | Collections    |   |   | Total      |  
| | Sales                       | $ | 12,679,768  |  | $ | 139,612        |   | $ | 12,819,380 |  
| |                             |   | 6,901,427   |  |   | 386,850        |   |   | 7,288,277  |  
| | Gross Profit                |   | 5,778,341   |  |   | (247,238       | ) |   | 5,531,103  |  
| | Operating Expenses (1)      |   | 4,001,712   |  |   | 82,428         |   |   | 4,084,140  |  
| | Income (Loss) From Segments |   | 1,776,629   |  |   | (329,666       | ) |   | 1,446,963  |  
| | Depreciation & Amortization |   |             |  |   |                |   |   | (41,115    | )
| | Total Operating Income      |   |             |  |   |                |   |   | 1,405,848  |  
| | Total Assets                | $ | 39,652,053  |  | $ | 282,081        |   | $ | 39,934,134 |  

| |                             |   |             |   |   | 2008           |   |   |            |  
| | --------------------------- | - | ----------- | - | - | -------------- | - | - | ---------- | -
| |                             |   | Carbiz      |   |   | Software and   |   |   |            |  
| |                             |   | Auto Credit |   |   | Other Products |   |   | Total      |  
| | Sales                       | $ | 8,371,006   |   | $ | 412,942        |   | $ | 8,783,948  |  
| | Cost of Sales               |   | 5,100,731   |   |   | 274,951        |   |   | 5,375,682  |  
| | Gross Profit                |   | 3,270,275   |   |   | 137,991        |   |   | 3,408,266  |  
| | Operating Expenses (1)      |   | 3,563,743   |   |   | 928,510        |   |   | 4,492,253  |  
| | Income (Loss) From Segments |   | (293,468    | ) |   | (790,519       | ) |   | (1,083,987 | )
| | Depreciation & Amortization |   |             |   |   |                |   |   | (32,766    | )
| | Total Operating Loss        |   |             |   |   |                |   |   | (1,116,753 | )
| | Total Assets                | $ | 26,674,462  |   | $ | 4,656,518      |   | $ | 31,330,980 |  

(1) Excluding depreciation and
amortization

| | Six months ended July 31,   |   |             |  |   | 2009           |   |   |            |  
| | --------------------------- | - | ----------- |  | - | -------------- | - | - | ---------- | -
| |                             |   | Carbiz      |  |   | Consulting and |   |   |            |  
| |                             |   | Auto Credit |  |   | Collections    |   |   | Total      |  
| | Sales                       | $ | 21,009,745  |  | $ | 325,012        |   | $ | 21,334,757 |  
| | Cost of Sales               |   | 11,531,911  |  |   | 624,145        |   |   | 12,156,056 |  
| | Gross Profit                |   | 9,477,834   |  |   | (299,133       | ) |   | 9,178,701  |  
| | Operating Expenses (1)      |   | 7,650,450   |  |   | 248,413        |   |   | 7,898,863  |  
| | Income (Loss) From Segments |   | 1,827,384   |  |   | (547,546       | ) |   | 1,279,838  |  
| | Depreciation & Amortization |   |             |  |   |                |   |   | (77,280    | )
| | Total Operating Income      |   |             |  |   |                |   |   | 1,202,558  |  
| | Total Assets                | $ | 39,652,053  |  | $ | 282,081        |   | $ | 39,934,134 |  

| |                             |   |             |  |   | 2008           |   |   |            |  
| | --------------------------- | - | ----------- |  | - | -------------- | - | - | ---------- | -
| |                             |   | Carbiz      |  |   | Software and   |   |   |            |  
| |                             |   | Auto Credit |  |   | Other Products |   |   | Total      |  
| | Sales                       | $ | 16,718,961  |  | $ | 988,259        |   | $ | 17,707,220 |  
| | Cost of Sales               |   | 9,520,092   |  |   | 655,283        |   |   | 10,175,375 |  
| | Gross Profit                |   | 7,198,869   |  |   | 332,976        |   |   | 7,531,845  |  
| | Operating Expenses (1)      |   | 6,783,383   |  |   | 1,888,164      |   |   | 8,671,547  |  
| | Income (Loss) From Segments |   | 415,486     |  |   | (1,555,188     | ) |   | (1,139,702 | )
| | Depreciation & Amortization |   |             |  |   |                |   |   | (79,678    | )
| | Total Operating Loss        |   |             |  |   |                |   |   | (1,219,380 | )
| | Total Assets                | $ | 26,674,462  |  | $ | 4,656,518      |   | $ | 31,330,980 |  

(1) Excluding depreciation and
amortization

21

---

|CARBIZ INC.                                             
|--------------------------------------------------------
|Notes to the Condensed Consolidated Financial Statements
|July 31, 2009 and 2008                                  
|(unaudited)                                             

|10. | INCOME TAXES
|--- | ------------

As of July 31, 2009, the Company had
net operating loss carry-forwards (NOLs) of approximately $26.7 million
(expiring from 2010 through 2030) and $13.7 million (expiring 2010 through 2017)
in the United States and Canada, respectively. The use of the United States NOLs
may be limited in any given year as a result of previous changes in ownership.
The Company recorded a gain on the extinguishment of debt of approximately $33.2
million during the three months ended April 30, 2009. The $24.4 million of U.S.
gain on debt extinguishment has been excluded from income for income tax
purposes based on Internal Revenue Code Section 108. As of February 1, 2011, the
Company will be required to reduce certain U.S. tax attributes which will
include the reduction of available NOLs. The Company expects available U.S. NOLs
to be reduced by approximately $24.4 million. The $8.8 million of Canadian gain
on debt extinguishment is not includable in Canadian income and has been treated
as a permanent item.

As a result of the above, no income
taxes are expected to result from fiscal 2010 operations.

22

---

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

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

Overview

The financial services industry is facing unprecedented
challenges in the face of the current national and global economic crisis. The
overall U.S. economy is experiencing significantly reduced business activity as
a result of, among other factors, disruptions in the financial markets during
the past year. Carbiz has been further challenged by the credit crisis due to
our primary lender, SWC Services LLC (SWC), filing bankruptcy in October 2008,
which decreased our access to operating cash flow during the period from October
2008 through February 2009. Accordingly, these financing constraints negatively
impacted our planned expansion and funding budgets during the first part of our
2010 fiscal year. In response to SWCs bankruptcy filing, on January 16, 2009,
Carbiz Inc. and its operating subsidiaries entered into amended financing
arrangements among Dealer Services Corporation (DSC), the trustee for SWC and
certain guarantors to the SWC Loan Agreement. The agreement provided for the
transfer of SWCs interests in the Loan Documents to DSC with the terms subject
to the Trustees receipt of a final order of the United States Bankruptcy Court
for the Northern District of Illinois. The agreement also provided that DSC
would forgive approximately $31.3 million of a total of approximately $43.3
million outstanding debt previously due to SWC and to additionally provide
future inventory floor plan financing of up to $7.5 million and used car lease
funding up to $14 million.

On June 15, 2009, we entered into a loan and security agreement
with Wells Fargo Preferred Capital, Inc. Wells Fargo committed to initially loan
Carbiz up to $15 million to finance receivables generated by Carbiz from the
sale of used vehicles and provides for a 55% advance rate on those receivables.
The loan has a stated interest rate of the 3 month LIBOR plus 3.35% . The line
of credit will increase to $17 million on January 1, 2010, and to $20 million on
March 31, 2010 and will terminate on June 30, 2011. These new credit facilities
will help expand our portfolio and provide us access to cash.

We anticipate increased revenues and operating earnings due to
the increased cash flow available for operations, but we will continue to seek
additional funding as necessary in order to sustain and grow our operations.

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

Credit loss estimates for notes and lease receivables were
higher than our historic figures as a result of the increased charge-offs and
delinquency due to rising unemployment rates and the deteriorating U.S. economic
environment. Our historic loss rates have been around 20%, but because of the
economic downturn, we began using a slightly higher rate for our provision in
January, 2009.

23

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Critical Accounting Policies

Revenue Recognition

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

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

Lease transactions

To qualify for financing under the new DSC financing agreement,
the Company converted a number of existing finance note receivables to lease
receivables, in February 2009. The Company considered these transactions to be
direct financing leases and accounted for the leases including the minimum
lease payments and the unguaranteed residual value as the gross investment in
the lease. The difference between this gross investment and the cost or carrying
amount was recorded as unearned income. The unearned income and initial direct
costs will be amortized to income over the lease term so as to produce a
constant periodic rate of return on the net investment in the lease.

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

Transfer of Financial Assets

From time to time during the six months ending July 31, 2009,
the Company has sold portions of its previously generated auto receivable note
portfolio and portions of its portfolio acquired in the Star Financial Services
transaction. All portfolio sales during this period met the requirements for a
sale, and the Company did not retain the right to service the loans.

24

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Use of estimates

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

Deferred finance costs

Deferred finance costs include the fair value of warrants
issued to an existing lender in conjunction with the issuance of the Wells Fargo
Preferred Credit line of credit. They will be amortized over the term of the
respective financing arrangement. Approximate future amortization of deferred
finance costs is as follows as of July 31, 2009:

Periods ending July 312010
    $
    1,348,2432011
    
    730,298$
    2,078,541


Prepaid interest

Prepaid interest included the initial interest recorded in
conjunction with the issuance of the Wells Fargo Preferred Credit line of credit
and is amortized over the term of the respective financing arrangement. Such
amount was determined by comparing the cost of the acquired portfolio and other
assets to the fair value of such assets acquired, and the difference was
recognized as prepaid interest. Approximate future amortization of prepaid
interest is as follows as of July 31, 2009:

Periods ending July 312010
    $
    1,035,2912011
    
    905,880$
    1,941,171


Share-Based Compensation

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

Derivative instruments

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

The Company estimates fair values of derivative financial
instruments using the Black-Scholes-Merton or the Monte Carlo Simulation
valuation technique, because that technique embodies all of the assumptions
(including credit risk, interest risk, stock price volatility and conversion
behavior estimates) that are necessary to fair value complex compound derivative
instruments. Estimating fair values of derivative financial instruments requires
the development of significant and subjective estimates that may, and are likely
to, change over the duration of the instrument with related changes in internal
and external market factors. In addition, option-based techniques are highly
volatile and sensitive to changes in the Companys trading market price which
has high-historical volatility.

25

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Since derivative financial instruments are initially and
subsequently carried at fair values, the Companys income will reflect the
volatility in these estimate and assumption changes.

Allowance for credit losses and concentration of credit
risk

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

The Company initiates steps to pursue collection of payments
for notes or lease receivables upon the customers first missed payment. Initial
steps may include contacting the customer via telephone, performing a field
visit to the customers work or home, or activating the automobiles onboard
starter disrupt system. When the initial steps are not successful the Company
takes steps to repossess the automobile. Once the automobile is in the Companys
possession, the vehicle is liquidated and the associated receivable account is
charged off at the expiration of the applicable States statutory notice period
for repossessed accounts, which is usually from 0 to 30 days long. In situations
where the Company has been unable to successfully repossess the automobile, the
account is written off immediately. When a customers account becomes severely
delinquent (usually 14 days for weekly pay accounts, 30 days for bi-weekly pay
accounts and 60 days for monthly pay accounts), the Company suspends accrual of
interest income. Notes and lease receivables for accounts held in repossession
are fully reserved for in the allowance for credit losses.

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

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

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

26

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Three Month Financial Information

The following summary of selected financial information for the
three month period ended July 31, 2009 and 2008 is derived from, and should be
read in conjunction with, and is qualified in its entirety by reference to, our
Condensed Consolidated Financial Statements, including the notes thereto as of
and for periods ended July 31, 2009 and 2008.

Three months ended July 31, 2009 compared to the three
months ended July 31, 2008

|                                            |   |            |   |  | % of    |  |   |            |   |  | % of    |  
|------------------------------------------- | - | ---------- | - |  | ------- |  | - | ---------- | - |  | ------- | -
|                                            |   | July 2009  |   |  | Revenue |  |   | July 2008  |   |  | Revenue |  
|Revenue                                     | $ | 12,819,380 |   |  | 100.0   |  | $ | 8,783,948  |   |  | 100.0   |  
|Cost of sales                               |   | 7,288,277  |   |  | 56.9    |  |   | 5,375,682  |   |  | 61.2    |  
|Gross profit                                |   | 5,531,103  |   |  | 43.2    |  |   | 3,408,266  |   |  | 38.8    |  
|Operating expenses                          |   | 4,125,255  |   |  | 32.2    |  |   | 4,525,019  |   |  | 51.5    |  
|Operating income (loss)                     |   | 1,405,548  |   |  | 10.1    |  |   | (1,116,753 | ) |  | (12.7   | )
|Interest expense                            |   | (1,060,237 | ) |  | 8.3     |  |   | (1,877,114 | ) |  | 21.4    |  
|Gain (loss) on derivative
      instruments |   | 4,709,781  |   |  | 36.7    |  |   | 2,010,476  |   |  | 22.9    |  
|Gain on sale of software division           |   | -          |   |  |         |  |   | 2,514,229  |   |  | 28.6    |  
|Transaction Costs                           |   | (637,500   | ) |  | 5.0     |  |   | -          |   |  |         |  
|NET INCOME                                  | $ | 4,417,892  |   |  | 34.5    |  | $ | 1,530,838  |   |  | 17.4    |  
|Income (loss) per common share              |   |            |   |  |         |  |   |            |   |  |         |  
|Basic                                       | $ | 0.04       |   |  |         |  | $ | 0.02       |   |  |         |  
|Diluted                                     | $ | 0.00       |   |  |         |  | $ | 0.02       |   |  |         |  

Revenue

In the three months ended July 31, 2009, our revenues increased
by approximately $4 million compared to the same period ended July 31, 2008.
This increase was primarily due to increased used car sales and leases. With a
new floor plan funding in place, the Company was able to stock and replenish the
stores with a variety of inventory which led to increased sales. The Companys
purchase of Star Financials portfolio and the growth of its own portfolio
combined to increase interest and lease income by approximately $450,000 from
the same period ended July 31, 2008.

Total revenue from car sales and leases during the three months
ended July 31, 2009 was $10,775,661 compared to $6,909,797 during the three
months ended July 31, 2008, an increase of 56%. This was a result of better
inventory at the stores and an overall increase in the average selling price per
car.

Total revenue from consulting and collection services during
the three months ended July 31, 2009 was $139,612 compared to $412,942, a
decrease of $273,330, during the three months ended July 31, 2008. The decrease
relates to the July 2008 sale of the software division. The three month period
this year includes no software revenue as compared to three months revenue in
the same period last year.

Interest and lease income for the three months ended July 31,
2009 increased by $442,898 compared to the previous years three month period.
This increase is due to the increased portfolio size from self generated sales
and the acquired Star portfolio.

Consulting and collections services

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

27

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Cost of Sales

Our cost of sales expense increased by $1,912,595 for the three
months ended July 31, 2009, compared to the previous years three month period.
Used car costs increased by $1,800,696, due to increased sales and increased
cost of our vehicles. Our Consulting and collections cost of sales increased by
$111,899 during the three months ended July 31, 2009 due to the increase in
collections department staff.

Expenses

For the three months ended July 31, 2009, our personnel
expenses increased by $99,120 compared to the previous years three month
period. This was due to an increase in corporate staff positions. Selling
expenses decreased for the three months ended July 31, 2009 by $68,045 due to
cost savings measures and a reduction in advertising spending. Professional fees
increased by $75,493, due to the use of outside professionals to assist with
internal control testing for management and complex tax computations Other
operating expenses increased by $110,298 during the three month period ended
July 31, 2009, mostly due to cost of living increases in rent and utilities and
the expansion of our corporate office.

Interest Expense

Our interest expense and other expenses decreased by $816,877
for the three months ended July 31, 2009, compared to the previous years three
month period, due to the lower amount of outstanding debt and the lower interest
rate on that debt. The outstanding debt was approximately $37.1 million in the
prior year as compared to $28.2 million in the current year. Interest expense
associated with convertible debenture financings is recognized based on the
effective interest method, and interest expense is therefore expected to
increase due to increased carrying values.

Gain/Loss on Derivative Instruments

For the three months ended July 31, 2009, we incurred a
non-cash gain of $4,709,781 as a result of the fair value adjustment of
outstanding derivative instruments which is based primarily on fluctuations in
our stock price. During the three months ended July 31, 2008, we incurred a
non-cash gain of $2,010,476. 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.

Provision for credit losses

As of July 31, 2009, the total Carbiz Auto Credit loan
portfolio was approximately $16.9 million and the net investment in lease
receivables was approximately $11.5 million. The allowance for doubtful accounts
at the same date was approximately $5.8 million for the vehicle loan portfolio,
and $2.8 million for the net investment in leases, a total of $8.6 million. The
provision for credit losses decreased by $758,625, mostly attributable to large
blocks of consumer notes written off in the prior year. Those notes were from
the acquired Calcars portfolio.

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Six Month Financial Information

The following summary of selected financial information for the
six months ended July 31, 2009 and 2008 is derived from, and should be read in
conjunction with, and is qualified in its entirety by reference to, our interim
financial statements, including the notes thereto, for periods ended July 31,
2009 and 2008.

Six months ended July 31, 2009 compared to the six months
ended July 31, 2008

|                                            |   |            |   |  | % of    |  |   |            |   |  | % of    |  
|------------------------------------------- | - | ---------- | - |  | ------- |  | - | ---------- | - |  | ------- | -
|                                            |   | July 2009  |   |  | Revenue |  |   | July 2008  |   |  | Revenue |  
|Revenue                                     | $ | 21,334,757 |   |  | 100.0   |  | $ | 17,707,220 |   |  | 100.0   |  
|Cost of sales                               | $ | 12,156,056 |   |  | 57.0    |  | $ | 10,175,375 |   |  | 57.5    |  
|Gross profit                                | $ | 9,178,701  |   |  | 43.0    |  | $ | 7,531,845  |   |  | 42.5    |  
|Operating expenses                          | $ | 7,976,143  |   |  | 37.4    |  | $ | 8,715,225  |   |  | 49.3    |  
|Operating income (loss)                     | $ | 1,202,558  |   |  | 5.6     |  | $ | (1,219,380 | ) |  | (6.9    | )
|Interest expense                            | $ | (2,022,069 | ) |  | 9.5     |  | $ | (3,783,535 | ) |  | 21.4    |  
|Gain (loss) on derivative
      instruments | $ | (53,319    | ) |  | 0.3     |  | $ | 4,044,824  |   |  | 22.8    |  
|Gain on sale of software division           | $ | -          |   |  |         |  | $ | 2,514,229  |   |  | 14.2    |  
|Transaction Costs                           | $ | (637,500   | ) |  | 3.0     |  | $ | -          |   |  |         |  
|Gain on debt extinguishment                 | $ | 33,199,287 |   |  | 125.6   |  | $ | -          |   |  |         |  
|NET INCOME (LOSS)                           | $ | 31,688,957 |   |  | 148.5   |  | $ | 1,556,148  |   |  | 8.7     |  
|Income (loss) per common share              |   |            |   |  |         |  |   |            |   |  |         |  
|Basic                                       | $ | 0.04       |   |  |         |  | $ | 0.02       |   |  |         |  
|Diluted                                     | $ | 0.00       |   |  |         |  | $ | 0.02       |   |  |         |  

Revenue

In the six months ended July 31 2009, our revenues increased by
approximately $3.6 million as compared to the same period ended July 31, 2008.
This increase was primarily due to increased used car sales and leases. With a
new floor plan funding in place, the Company was able to stock and replenish the
stores with a variety of inventory which led to increased sales. The Companys
purchase of Star Financials portfolio and the growth of its own portfolio
combined to increase interest and lease income by approximately $450,000 from
the same period ended July 31, 2008.

Total revenue from car sales and leases during the six months
ended July 31, 2009 was $17,633,862 compared to $13,409,831 during the six
months ended July 31, 2008, an increase of 31%. This was a result of better
inventory at the stores and an overall increase in the average selling price per
car.

Total revenue from consulting and collection services during
the six months ended July 31, 2009 was $325,012 compared to $988,259, during the
six months ended July 31, 2008, a decrease of $663,247 . The decrease relates to
the July 2008 sale of the software division. The six month period this year
included no software revenue as compared to six months revenue in the same
period last year.

Interest and lease income for the six months ended July 31,
2009 increased by $66,753 compared to the previous years six month period. This
slight increase is the result of a higher portfolio balance from period to
period.

Cost of Sales

Our cost of sales expense increased by $1,980,681 for the six
months ended July 31, 2009, compared to the previous years six month period.
Used car costs increased by $2,011,819 due to increased sales and increased cost
of our vehicles. Our Consulting and collections cost of sales decreased by
$31,138 during the six months ended July 31, 2009 due to the sale of the
software operations in July 2008, and the subsequent reduction of staff and
overhead.

Expenses

For the six months ended July 31, 2009, our personnel expenses
increased by $18,837 compared to the previous years three month period. This
was due to an increase in corporate staff positions. Selling expenses decreased
for the six months ended July 31, 2009 by $104,371 due to cost savings measures
and a reduction in advertising spending. Professional fees decreased by
$110,615, because in the prior year, the Company needed additional legal and
accounting assistance due to the Midwest and Houston portfolio acquisitions.
Other operating expenses

29

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increased by $179,692 during the six month period ended July
31, 2009, mostly due to cost of living increases in rent and utilities and the
expansion of our corporate office.

Interest Expense

Our interest expense and other expenses decreased by $1,761,466
for the three months ended July 31, 2009, compared to the previous years three
month period, due to the lower amount of outstanding debt and the lower interest
rate on that debt. The outstanding debt was approximately $37.1 million in the
prior year as compared to $28.2 million in the current year. Interest expense
associated with convertible debenture financings is recognized based on the
effective interest method, and interest expense is therefore expected to
increase due to increased carrying values. The current line of credit balance
reflects the total borrowed against the acquired loan portfolios and newly
generated sales at the Midwest and Texas locations.

Gain/Loss on Derivative Instruments

For the six months ended July 31, 2009, we incurred a non-cash
loss of $53,319 as a result of the fair value adjustment of outstanding
derivative instruments which is based primarily on fluctuations in our stock
price. During the six months ended July 31, 2008 we incurred a non-cash gain of
$4,044,834. We expect gains and losses on derivative instruments in the future
while the convertible debentures, the host instrument of the derivative
liabilities, and related warrants remain outstanding.

Gain on debt forgiveness

During the six months ended July 31, 2009, we had a $33.2
million gain on extinguishment of debt. $24.4 million of the extinguishment gain
came from the DSC debt forgiveness of $31.4, less the cost of converting our
financed receivables to leases of approximately $4.6 million, the fair value of
the DSC warrants issued, of approximately $1.4 million, the write off of
deferred financing costs of approximately $600,000 and the additional DSC origin
and commitment fees of $370,000. The remaining $8.8 million gain on debt
extinguishment was derived from a modification of the Trafalgar debenture
agreement. There was no such gain in the six months ended July 31, 2008.

Consulting and collections services

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

Provision for credit losses

As of July 31, 2009, the total Carbiz Auto Credit loan
portfolio was approximately $16.9 million and the net investment in lease
receivables was approximately $11.5 million. The allowance for doubtful accounts
at the same date was approximately $5.8 million for the vehicle loan portfolio,
and $2.8 million for the net investment in leases, a total of $8.6 million. The
provision for credit losses decreased by $758,625, mostly attributable to large
blocks of consumer notes written off in the prior year. Those notes were from
the acquired Calcars portfolio.

30

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Significant Financing Arrangements

Trafalgar Secured Subordinated Debenture
Financings

January 2009 and subsequent modifications

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

Additional Unsecured Subordinated Debenture
Financing

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

Senior Credit Facilities

Dealer Services Corporation

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

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

The Asset Purchase Agreement also provided that the Loan
Agreement would be amended, effective as of February 20, 2009, pursuant to the
terms of the Third Amended and Restated Loan and Security Agreement by and
between us, DSC and the other parties thereto (the New Loan Agreement). The
New Loan Agreement substantially revised the terms of the Loan Agreement, and
provided that DSC would forgive all of the outstanding balance due under the SWC
Loan Agreement in excess of $12,000,000. At February 20, 2009, there was a total
balance of approximately $43.3 million borrowed under the SWC credit facilities.
The forgiveness of such amount resulted in us recognizing income in the our
fiscal year 2010 for both financial reporting and federal income tax purposes in
the amount of the difference between the amount owed as of the closing date and
$12,000,000, less the amount of any costs incurred. We incurred normal
transaction costs including commitment fees and legal costs related to the
restructuring of current notes receivable as required under the New Loan
Agreement. For tax purposes it is anticipated that we will apply IRC Section 108
to the gain associated with the forgiveness of SWC debt in fiscal year 2010. We
believe that we have net operating loss carry forwards (NOLs) available that
will be adequate to absorb any remaining taxable

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income. However, as a consequence of using IRC Section 108,
these NOLs will most likely be reduced to zero in the year following the
transaction. There may also be other adjustments that we must make that would
have the effect of deferring any potential income tax liabilities. We believe
that beyond the reduction of the NOLs that these other adjustments will not have
a material impact on our consolidated financial position.

As DSC primarily provides financing to automobile dealers who
lease automotive vehicles to consumers, the New Loan Agreement provided that we
had to convert a number of outstanding notes receivable due from consumers who
have purchased vehicles from us into closed-end leases or pay a substantial
penalty to DSC. Under the New Loan Agreement, we delivered to DSC a set of
conversion documents, consisting of a signed closed-end lease and a bill of sale
for each vehicle, with respect to vehicles with an aggregate Floor Plan Value
(as defined below) of approximately $9,000,000. We incurred costs of
approximately $4.6 million in connection with the conversion of these notes
receivable, including incentives to borrowers under the notes receivables. The
New Loan Agreement provides us with floor plan financing, and generally provides
that all advances borrowed to purchase vehicles must be repaid ratably over a
two-year period, or upon the sale of the associated vehicle. For loans which are
converted to closed-end leases, the two years will commence on the date of
conversion. The total credit limit under the New Loan Agreement, as amended, is
$19,500,000, which includes the $12,000,000 paid to the Trustee under the Asset
Purchase Agreement. As amounts are repaid to DSC, we will be able to re-borrow
funds to purchase additional vehicles; provided however, that all advances under
the New Loan Agreement are at the sole discretion of DSC. The interest rate for
all advances under the floor plan facility, including the amount paid to the
Trustee for our inventory of vehicles and all vehicles subject to the conversion
documents, will be variable, based upon published rates of DSC. The effective
rate as of July 31, 2009 was approximately 21.94% and our outstanding balance at
July 31, 2009 is $15,636,084.

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

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

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

In connection with the closing of the Asset Purchase Agreement
and the New Loan Agreement, the Company requested that Ross Quigley, a director
and significant shareholder of the Company, exercise certain warrants previously
issued to him to purchase 11,073,419 shares of Company common stock at CDN$.12
per share, 72,333 shares at US$.20 per share, 72,333 shares at US$.15 per share,
72,333 shares at US$.10 per share and 72,333 shares at US$.01 per share, in
order to provide additional equity financing to the Company. As a condition to
such purchase, Mr. Quigley requested that the Company issue to him an additional
warrant to purchase up to 10 million shares of Company common stock at any time
prior to February 20, 2014 for US$.08 per share (the New Quigley Warrant) and,
upon approval of the transaction by the Board of Directors, the Company agreed
to issued such warrant to Mr. Quigley. On February 20, 2009, Mr. Quigley
delivered $750,000 of the $1,029,861 to exercise the warrants to the Company.
The remaining balance of $279,861 was paid on March 13, and the Company issued
11,362,751 shares of common stock to Mr. Quigley.

Under the warrant issued to DSC in connection with the New Loan
Agreement (the Existing DSC Warrant), the issuance of the New Quigley Warrant
would have required the Company to increase the 9,718,289 shares issuable under
the Existing DSC Warrant to 10,222,604 shares and reduce the exercise price for
all of the shares issuable

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under the Existing DSC Warrant from $0.03 per share to $0.02852
per share. However, DSC agreed that in lieu of the Company increasing the number
of shares issuable under the Existing DSC Warrant and reducing the exercise
price for all of the shares issuable under the Existing DSC Warrant, the Company
could issue to DSC a new warrant to purchase up to 750,000 shares of Company
common stock at any time prior to February 20, 2014 for $.08 per share (the New
DSC Warrant). The Company has issued such warrant to DSC.

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

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

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

Wells Fargo

On June 15, 2009, all of the Company's direct and indirect
subsidiaries (the "Borrowers") entered into the WF Loan Agreement dated June 15,
2009 with Wells Fargo Preferred Capital, Inc. Under the WF Loan Agreement, Wells
Fargo committed to loan the Borrowers up to (i) $15,000,000 through and
including December 31, 2009, (ii) $17,000,000 commencing January 1, 2010 through
and including March 31, 2010 and (iii) $20,000,000 thereafter. The purpose of
the credit facility is to finance receivables generated by the Company from the
sales of used vehicles. The Borrowers may borrow up to 55% of the outstanding
amount due under eligible receivables, as defined in the WF Loan Agreement,
other than receivables acquired from Star Financial Services in June 2009. With
respect to the receivables acquired from Star, they may borrow up to 95% of the
amount outstanding under such receivables through the 60th day following the
date of the WF Loan Agreement and 90% thereafter.

The WF Loan Agreement is subject to certain borrowing
limitations, and includes certain financial and restrictive covenants, including
but not limited to covenants requiring the maintenance of minimum EBITDA and
debt to equity ratios. The credit facility will terminate on June 30, 2011.

Loans will bear interest at an annual rate equal to the
three-month London Interbank Offered Rate plus 3.35% An unused line fee of 0.25%
per annum is charged on the unused portion of the credit facility on a monthly
basis, and the Company must pay Wells Fargo an administrative fee of $1,000 per
month.

Amounts due to Wells Fargo under the WF Loan Agreement are
secured by a security interest in all of the personal property of the Borrowers,
and guaranteed by the Company under a Guaranty Agreement.

The Borrowers initial draw under the WF Loan Agreement was
$10,303,665, $8,153,665 of which was used to pay the indebtedness of Star to WF.

The total Wells Fargo debt outstanding at July 31, 2009 was
$11,616,397.

Liquidity and Capital Resources

As of July 31, 2009 and January 31, 2009, we had $818,325 and
$674,624, respectively, in cash and cash equivalents. During the six month
period ended July 31, 2009, we decreased our accounts payable and accrued
liabilities by $685,681, which totaled $3,841,360 at July 31, 2009.

During the six months ended July 31, 2009, we issued
approximately 980,392 shares of common stock at a conversion price of $0.0765 in
a Trafalgar convertible debenture conversion. Approximately $19,000 of the
payment

33

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was charged to interest expense, and the remaining amount went
to several of the financial instruments derivative components. Accordingly, no
future cash will be required to pay off this portion of the debentures.

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

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

On June 15, 2009, the Company obtained a revolving line of
credit with Wells Fargo Preferred Capital for up to $20 million that will
finance up to 55% of the Companys eligible financed notes receivable. The
revolving line of credit is a 2 year commitment and interest is payable
monthly.

We have incurred significant net losses and negative cash flows
from operations, although the gain on debt restructuring during the six months
ending July 31, 2009 offset this trend and decreased our stockholders deficit.
At July 31, 2009, we had a stockholders deficit of $665,000 versus $34.7
million at January 31, 2009. The continued worldwide financial and credit crisis
has strained investor liquidity and contracted credit markets. If this
environment continues or worsens, it may make the future cost of raising funds
through the debt or equity markets more expensive or make those markets
unavailable at a time when we require additional financial investment. If we are
unable to attract additional funds it may adversely affect our ability to
achieve our development and commercialization goals, which could have a material
and adverse effect on our business, results of operations and financial
condition. As a result of our previous lack of financial liquidity and negative
stockholders equity, there is substantial doubt about our ability to continue
as a going concern.

During the six months ending July 31, 2009 a board member
warrant holder exercised 11,762,351 common stock warrants with proceeds of
$1,029,851.

With the Companys new financing agreements in place and our
existing cash and cash equivalents are believed by management to be sufficient
to finance planned operations, debt repayment obligations and capital
expenditures through the second quarter of fiscal year 2012, but in order to
proceed with the Companys current expansion plan for operations in the
Buy-Here-Pay-Here and Lease-Here-Pay-Here industries, additional capital may be
required. The Companys ability to arrange such financing in the future will
depend in part upon the prevailing capital market conditions as well as business
performance. There can be no assurance that the Company will be successful in
these efforts to arrange additional financing, if needed, on terms satisfactory
to it or at all. Available resources may be consumed more rapidly than currently
anticipated, resulting in the need for additional funding sooner than
anticipated. The failure to obtain adequate financing could result in a
substantial curtailment of the Companys operations. Accordingly, the Company
anticipates that it may be required to raise additional capital through a
variety of sources, including:

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

The recent worldwide financial and credit crisis has strained
investor liquidity and contracted credit markets. If this environment continues
or worsens, it may make the future cost of raising funds through the debt or
equity markets more expensive or make those markets unavailable at a time when
the Company requires additional financial

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investment. If the Company is unable to attract additional
funds it may adversely affect its ability to achieve its development and
commercialization goals, which could have a material and adverse effect on its
business, results of operations and financial condition.

As of July 31, 2009, payments due by us over the next five
fiscal years for operating and capital leases, and long-term debt are
approximately as follows:

|                       |   | Less Than  |  |   | One to Three |  |   | Three to Five |  |   | Greater than |  |   |            | 
|---------------------- | - | ---------- |  | - | ------------ |  | - | ------------- |  | - | ------------ |  | - | ---------- | 
|                       |   | One Year   |  |   | Years        |  |   | Years         |  |   | Five Years   |  |   | Total      | 
|Operating Leases       | $ | 1,330,440  |  | $ | 1,462,671    |  | $ | 871,586       |  | $ | 1,309,086    |  | $ | 4,973,783  | 
|Long-Term Debt         |   | 12,394,817 |  |   | 15,833,763   |  |   |               |  |   |              |  |   | 28,228,580 | 
|Convertible Debentures |   | 96.935     |  |   | 472,649      |  |   |               |  |   |              |  |   | 569,584    | 
|                       | $ | 13,822,192 |  | $ | 17,769,083   |  | $ | 871,586       |  | $ | 1,309,086    |  | $ | 33,771,947 | 

Off-Balance Sheet Arrangements

As of July 31, 2009, we do not have any
off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about
Market Risk

Not required

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Item 4T. Controls and Procedures

Disclosure Controls

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

Internal Control Over Financial Reporting

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

Limitations on the Effectiveness of Internal
Controls

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

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PART II  OTHER INFORMATION

Item 1. Legal Proceedings

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

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

None.

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

Our Annual Meeting of Shareholders was held at the Ritz-Carlton
at 1111 Ritz-Carlton Dr., Sarasota, Florida on June 19, 2009 at 4:00 p.m. Our
shareholders voted on two items, with results as indicated:

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

| | Director             | No. of Shares | No. of Shares | No. of Shares
| | -------------------- | ------------- | ------------- | -------------
| |                      | Voted For     | Voted Against | Withheld     
| | Carl Ritter          | 77,986,612    | 39,363        | 0            
| | Ross Quigley         | 77,986,612    | 39,363        | 0            
| | Richard Lye          | 77,986,612    | 39,363        | 0            
| | Theodore Popel       | 77,986,612    | 39,363        | 0            
| | Stanton Heintz       | 77,986,612    | 39,363        | 0            
| | Christopher Bradbury | 77,986,612    | 39,363        | 0            
| | Wallace Weylie       | 77,986,612    | 39,363        | 0            
| | Vernon Haverstock    | 77,986,612    | 39,363        | 0            
| | Gene Tomsic          | 77,986,612    | 39,363        | 0            
| | Brandon Quigley      | 77,986,612    | 39,363        | 0            

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

No. of Shares
    No. of Shares
    
    No. ofVoted For
    Voted Against
    No. of Abstentions
    Broker Non-Votes78,025,975
    -
    -
    -


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

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SIGNATURES

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

|                         | CARBIZ INC.                  
|------------------------ | -----------------------------
|                         |                              
|                         |                              
|                         |                              
|Date: September 10, 2009 | /s/
      Carl Ritter        
|                         | Carl Ritter                  
|                         | Chief Executive Officer      
|                         | (principal executive officer)

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