---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549_______________

FORM 10-QSB_______________

(Mark One)

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

For the quarterly period ended October 31, 2007

OR

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

For the transition period from ________________ to
_______________

Commission file Number: 000-52209

_______________

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

_______________

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

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

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

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

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

As of December 14, 2007, 65,101,521 common shares of the issuer
were issued and outstanding.

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

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CARBIZ INC.

FORM 10-QSB

For the Quarterly Period Ended October 31, 2007

INDEX

|PART I        | Financial Information                                             |   
|------------- | ----------------------------------------------------------------- | --
|Item
      1. | Financial
      Statements                                        | 1 
|Item
      2. | Managements
      Discussion and Analysis or Plan of Operation   | 20
|Item
      3. | Controls
      and Procedures                                     | 28
|              |                                                                   |   
|PART II       | Other Information                                                 |   
|Item
      1. | Legal
      Proceedings                                           | 29
|Item
      2. | Unregistered
      Sales of Equity Securities and Use of Proceeds | 29
|Item
      3. | Defaults
      Upon Senior Securities                             | 29
|Item
      4. | Submission
      of Matters to a Vote of Security Holders         | 29
|Item
      5. | Other
      Information                                           | 29
|Item
      6. | Exhibits                                                          | 29

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

---

PART 1  FINANCIAL INFORMATION

Item 1. Financial Statements

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

|                                                                                 |   | As at            |   |   | As at            |  
|-------------------------------------------------------------------------------- | - | ---------------- | - | - | ---------------- | -
|                                                                                 |   | October 31, 2007 |   |   | January 31, 2007 |  
|                                                                                 |   | (unaudited)      |   |   |                  |  
|ASSETS                                                                           |   |                  |   |   |                  |  
|CURRENT                                                                          |   |                  |   |   |                  |  
|Cash and cash equivalents                                                        | $ | 2,472,019        |   | $ | 67,990           |  
|Accounts receivable, net                                                         |   | 60,095           |   |   | 48,482           |  
|Current portion of notes receivable, net                                         |   | 10,081,473       |   |   | 274,151          |  
|Inventory                                                                        |   | 987,434          |   |   | 67,785           |  
|Prepaids and other assets                                                        |   | 337,817          |   |   | 171,350          |  
|Deferred costs                                                                   |   | 6,185            |   |   | 13,309           |  
|                                                                                 |   | 13,945,023       |   |   | 643,067          |  
|NOTES RECEIVABLE, NET, LESS CURRENT PORTION                                      |   | 7,800,343        |   |   | 44,887           |  
|DEFERRED FINANCING COSTS                                                         |   | 1,790,416        |   |   | -                |  
|DEFERRED COSTS                                                                   |   |                  |   |   | 3,706            |  
|PROPERTY AND EQUIPMENT,
      NET                                                |   | 670,120          |   |   | 76,054           |  
|                                                                                 | $ | 24,205,902       |   | $ | 767,714          |  
|                                                                                 |   |                  |   |   |                  |  
|LIABILITIES                                                                      |   |                  |   |   |                  |  
|CURRENT                                                                          |   |                  |   |   |                  |  
|Accounts payable and accrued
      liabilities                                   | $ | 1,397,872        |   | $ | 1,232,610        |  
|Loans payable                                                                    |   |                  |   |   |                  |  
|Related party                                                                    |   | -                |   |   | 230,000          |  
|Line of credit                                                                   |   | 10,288,611       |   |   | -                |  
|Inventory floor
      plan                                                       |   | 350,000          |   |   | -                |  
|Current portion of capital leases                                                |   | 8,217            |   |   | 7,662            |  
|Current portion of long-term
      debt                                          |   | -                |   |   | 180,139          |  
|Current portion of convertible debenture                                         |   | 201,318          |   |   | -                |  
|Derivative liability                                                             |   | 10,331,317       |   |   | 3,415,679        |  
|Deferred
      revenue                                                           |   | 90,898           |   |   | 121,239          |  
|                                                                                 |   | 22,668,233       |   |   | 5,187,329        |  
|DEFERRED REVENUE                                                                 |   | -                |   |   | 49,805           |  
|CAPITAL LEASES, NET OF CURRENT PORTION                                           |   | 4,490            |   |   | 10,724           |  
|CONVERTIBLE DEBENTURE, LESS CURRENT PORTION                                      |   | 421,823          |   |   | -                |  
|Includes $17,905 to Related
      Parties (Note 3(d))                            |   |                  |   |   |                  |  
|LONG-TERM DEBT, LESS
      CURRENT PORTION                                       |   | 9,596,609        |   |   | 35,851           |  
|                                                                                 |   | 32,691,155       |   |   | 5,283,709        |  
|MINORITY INTEREST                                                                |   | 194,449          |   |   | 206,170          |  
|COMMITMENTS AND CONTINGENCIES (Note 12)                                          |   | -                |   |   | -                |  
|                                                                                 |   |                  |   |   |                  |  
|STOCKHOLDERS' DEFICIENCY                                                         |   |                  |   |   |                  |  
|COMMON SHARES                                                                    |   | 16,274,119       |   |   | 16,274,119       |  
|Unlimited shares authorized,
      65,101,521 and 64,224,404 common shares       |   |                  |   |   |                  |  
|issued and outstanding as at October
      31 and January 31, 2007, respectively |   |                  |   |   |                  |  
|ADDITIONAL PAID-IN CAPITAL                                                       |   | 6,962,307        |   |   | 6,222,397        |  
|OTHER COMPREHENSIVE LOSS                                                         |   | (385,197         | ) |   | (385,197         | )
|ACCUMULATED DEFICIT                                                              |   | (31,530,931      | ) |   | (26,833,484      | )
|                                                                                 |   | (8,679,702       | ) |   | (4,722,165       | )
|                                                                                 | $ | 24,205,902       |   | $ | 767,714          |  

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

1

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|CARBIZ INC.                                     |   |                            |   |   |                           |   |   |            |   |   |            |  
|----------------------------------------------- | - | -------------------------- | - | - | ------------------------- | - | - | ---------- | - | - | ---------- | -
|Condensed Consolidated Statements of Operations |   |                            |   |   |                           |   |   |            |   |   |            |  
|(unaudited)                                     |   |                            |   |   |                           |   |   |            |   |   |            |  
|(expressed in U.S. dollars)                     |   |                            |   |   |                           |   |   |            |   |   |            |  
|                                                |   | For the three months ended |   |   | For the nine months ended |  
|                                                |   | October 31                 |   |   | October 31                |  
|                                                |   | 2007                       |   |   | 2006                      |   |   | 2007       |   |   | 2006       |  
|                                                |   |                            |   |   |                           |   |   |            |   |   |            |  
|SALES                                           |   |                            |   |   |                           |   |   |            |   |   |            |  
|Software and Consulting Services                | $ | 575,533                    |   | $ | 609,371                   |   | $ | 1,767,186  |   | $ | 1,806,397  |  
|Used Car Sales and Financing                    |   | 252,830                    |   |   | 176,268                   |   |   | 844,156    |   |   | 585,009    |  
|Interest income                                 |   | 579,191                    |   |   | 18,602                    |   |   | 620,188    |   |   | 60,852     |  
|                                                |   | 1,407,554                  |   |   | 804,241                   |   |   | 3,231,530  |   |   | 2,452,258  |  
|COST OF SALES                                   |   |                            |   |   |                           |   |   |            |   |   |            |  
|Software and Consulting Services                |   | 301,297                    |   |   | 235,006                   |   |   | 763,100    |   |   | 698,020    |  
|Used Car Sales and Financing                    |   | 532,880                    |   |   | 146,479                   |   |   | 1,005,871  |   |   | 610,027    |  
|                                                |   | 834,177                    |   |   | 381,485                   |   |   | 1,768,971  |   |   | 1,308,047  |  
|GROSS PROFIT                                    |   | 573,377                    |   |   | 422,756                   |   |   | 1,462,559  |   |   | 1,144,211  |  
|Gain on debt foregiveness                       |   | -                          |   |   | -                         |   |   | 391,337    |   |   | -          |  
|Personnel expenses                              |   | 366,133                    |   |   | 262,696                   |   |   | 896,938    |   |   | 762,596    |  
|                                                |   |                            |   |   |                           |   |   |            |   |   |            |  
|Selling expenses                                |   | 98,061                     |   |   | 73,679                    |   |   | 287,296    |   |   | 255,503    |  
|Other operating expenses                        |   | 1,203,970                  |   |   | 515,738                   |   |   | 2,726,728  |   |   | 1,143,395  |  
|                                                |   | 1,668,164                  |   |   | 852,113                   |   |   | 3,910,962  |   |   | 2,161,494  |  
|OPERATING LOSS                                  |   | (1,094,787                 | ) |   | (429,357                  | ) |   | (2,057,066 | ) |   | (1,017,283 | )
|                                                |   |                            |   |   |                           |   |   |            |   |   |            |  
|INTEREST AND OTHER EXPENSES                     |   | (595,542                   | ) |   | (47,767                   | ) |   | (834,479   | ) |   | (179,814   | )
|LOSS ON DERIVATIVE INSTRUMENTS                  |   | (656,350                   | ) |   | (2,817,530                | ) |   | (1,408,092 | ) |   | (2,817,530 | )
|WRITE-OFF OF DEFERRED FINANCING COSTS           |   | (409,533                   | ) |   |                           |   |   | (409,533   | ) |   |            |  
|MINORITY INTEREST                               |   | 10,687                     |   |   | (1,302                    | ) |   | 11,721     |   |   | 22,138     |  
|NET LOSS FROM                                   |   |                            |   |   |                           |   |   |            |   |   |            |  
|CONTINUING OPERATIONS                           |   | (2,745,525                 | ) |   | (3,295,956                | ) |   | (4,697,449 | ) |   | (3,992,489 | )
|INCOME FROM                                     |   |                            |   |   |                           |   |   |            |   |   |            |  
|DISCONTINUED OPERATIONS                         |   | -                          |   |   | -                         |   |   | -          |   |   | 556,783    |  
|                                                |   |                            |   |   |                           |   |   |            |   |   |            |  
|NET LOSS                                        | $ | (2,745,525                 | ) | $ | (3,295,956                | ) | $ | (4,697,449 | ) | $ | (3,435,706 | )
|NET LOSS PER SHARE FROM                         |   |                            |   |   |                           |   |   |            |   |   |            |  
|CONTINUING OPERATIONS                           | $ | (0.04                      | ) | $ | (0.07                     | ) | $ | (0.07      | ) | $ | (0.08      | )
|NET INCOME PER SHARE FROM                       |   |                            |   |   |                           |   |   |            |   |   |            |  
|DISCONTINUED OPERATIONS                         | $ | -                          |   | $ | -                         |   | $ | -          |   | $ | 0.01       |  
|                                                |   |                            |   |   |                           |   |   |            |   |   |            |  
|NET LOSS PER SHARE                              | $ | (0.04                      | ) | $ | (0.07                     | ) | $ | (0.07      | ) | $ | (0.07      | )
|                                                |   |                            |   |   |                           |   |   |            |   |   |            |  
|                                                |   |                            |   |   |                           |   |   |            |   |   |            |  
|WEIGHTED AVERAGE NUMBER OF COMMON               |   |                            |   |   |                           |   |   |            |   |   |            |  
|SHARES OUTSTANDING, BASIC AND DILUTED           |   | 64,500,701                 |   |   | 44,230,637                |   |   | 64,596,587 |   |   | 48,035,734 |  

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

2

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|CARBIZ INC.                                                                                    |   |                           |   |   |                  |  
|---------------------------------------------------------------------------------------------- | - | ------------------------- | - | - | ---------------- | -
|Condensed Consolidated Statements of Cash Flows                                                |   |                           |   |   |                  |  
|(unaudited)                                                                                    |   |                           |   |   |                  |  
|(expressed in U.S. dollars)                                                                    |   |                           |   |   |                  |  
|                                                                                               |   | For the Nine Months Ended |  
|                                                                                               |   | October 31, 2007          |   |   | October 31, 2006 |  
|OPERATING                                                                                      |   |                           |   |   |                  |  
|Net loss                                                                                       | $ | (4,697,449                | ) | $ | (3,435,706       | )
|Adjustments, net of acquisition,
      to reconcile net loss to net cash flows from operations |   |                           |   |  
|Depreciation of property and equipment                                                         |   | 55,747                    |   |   | 60,559           |  
|Minority
      interest                                                                        |   | (11,721                   | ) |   | 22,138           |  
|Loss on disposal of assets                                                                     |   | -                         |   |   | 71,926           |  
|Loss on
      derivative financial instruments                                                 |   | 1,408,092                 |   |   | 2,817,530        |  
|Gain on debt forgiveness                                                                       |   | (391,337                  | ) |   | -                |  
|Write - off
      of deferred financing costs                                                  |   | 409,533                   |   |   | -                |  
|Amortization of deferred financing costs                                                       |   | 148,340                   |   |   | -                |  
|Amortization of debt discount                                                                  |   | 222,150                   |   |   | -                |  
|Stock-based compensation                                                                       |   | 320,900                   |   |   | 255,700          |  
|Provision for bad debts                                                                        |   | (5,984                    | ) |   | -                |  
|Net changes in operating
      assets and liabilities                                          |   |                           |   |   |                  |  
|Accounts Receivable                                                                            |   | (11,613                   | ) |   | 41,228           |  
|Notes Receivable                                                                               |   | 968,703                   |   |   | 209,457          |  
|Prepaids
      and other assets                                                                |   | (187,301                  | ) |   | (126,684         | )
|Inventory                                                                                      |   | (714,259                  | ) |   | (16,767          | )
|Deferred
      costs                                                                           |   | 10,830                    |   |   | 31,142           |  
|Accounts payable and accrued liabilities                                                       |   | (158,636                  | ) |   | (8,835           | )
|Deferred revenue                                                                               |   | (80,146                   | ) |   | (171,130         | )
|NET CASH FLOWS
      FROM OPERATING ACTIVITIES                                                 |   | (2,714,151                | ) |   | (249,442         | )
|INVESTING                                                                                      |   |                           |   |   |                  |  
|Acquisition of
      Calcars assets                                                            |   | (18,559,709               | ) |   | -                |  
|Acquisition of property and equipment                                                          |   | (135,756                  | ) |   | (10,098          | )
|NET CASH FLOW
      FROM INVESTING ACTIVITIES                                                  |   | (18,695,465               | ) |   | (10,098          | )
|FINANCING                                                                                      |   |                           |   |   |                  |  
|Proceeds from
      term loan financing                                                        |   | 18,559,709                |   |   | -                |  
|Repayment of capital leases                                                                    |   | (5,679                    | ) |   | (6,227           | )
|Proceeds from
      line of credit                                                             |   | 1,675,511                 |   |   | -                |  
|Repayment long-term debt                                                                       |   | (215,990                  | ) |   | (101,911         | )
|Repayment of
      related party debt                                                          |   | (230,000                  | ) |   | -                |  
|Proceeds from Trafalgar
      debenture, including derivative components                       |   | 4,998,627                 |   |   | -                |  
|Payment of
      deferred financing costs                                                      |   | (1,610,479                | ) |   | -                |  
|Issuance of common shares                                                                      |   | -                         |   |   | 283,370          |  
|Proceeds from exercise of warrants                                                             |   | 102,500                   |   |   | -                |  
|NET CASH FLOWS FROM FINANCING ACTIVITIES                                                       |   | 23,274,199                |   |   | 175,232          |  
|EFFECT OF EXCHANGE RATE CHANGES
      ON CASH                                                  |   |                           |   |   |                  |  
|AND CASH EQUIVALENTS                                                                           |   | 539,446                   |   |   | 44,188           |  
|INCREASE (DECREASE) IN CASH AND                                                                |   |                           |   |   |                  |  
|CASH EQUIVALENTS                                                                               |   | 2,404,029                 |   |   | (40,120          | )
|CASH AND CASH EQUIVALENTS,                                                                     |   |                           |   |   |                  |  
|BEGINNING OF PERIOD                                                                            |   | 67,990                    |   |   | 119,735          |  
|CASH AND CASH EQUIVALENTS,                                                                     |   |                           |   |   |                  |  
|END OF PERIOD                                                                                  | $ | 2,472,019                 |   | $ | 79,615           |  

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

3

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

|1. | ORGANIZATION AND BUSINESS
|-- | -------------------------

Carbiz Inc. (the Company) was
incorporated pursuant to the provisions of the Business Corporations Act of
Ontario (OBCA) under the name Data Gathering Capital Corp. on March 31,
1998. On September 1, 1999, the Company changed its name by articles of
amendment under the OBCA to Carbiz.com Inc., and then changed its name again on
July 15, 2003 to Carbiz Inc. As of October 3, 2006, the Companys common shares
are quoted on the United States Over the Counter Bulletin Board. Prior to such
date, the Companys common shares were traded on the TSX Venture Exchange
(TXSV), formerly the Canadian Venture Exchange (CDNX).

In the opinion of management, all
adjustments, consisting of normal recurring adjustments, have been made in the
October 31, 2007 and 2006 financial statements, which are necessary for a fair
financial statement presentation. The results for the nine months ended October
31, 2007 and 2006 are not necessarily indicative of financial operations for the
full year. These financial statements are combined and condensed. For further
information, refer to the financial statements and footnotes in the Companys
audited financial statements for the year ended January 31, 2007 which are
included in the Companys Form 10KSB filed with the U.S. Securities and Exchange
Commission (the SEC) on April 20, 2007 (January 31, 2007 Form 10KSB).

References to the Company typically
include the Companys consolidated subsidiaries and joint venture. The Companys
operations are principally conducted through its three operating subsidiaries,
Carbiz USA, Inc., a Delaware corporation, Carbiz Auto Credit, Inc. (CAC), a
Florida corporation, Carbiz Auto Credit, AQ Inc. (AQ), a Florida corporation,
and a joint venture, Carbiz Auto Credit JV1, LLC (JV1). a Florida limited
liability company. Collectively, Carbiz Inc., Carbiz USA, Inc., CAC , AQ, and
JV1 are referred to herein as Carbiz or the Company.

All dollar figures presented in this
report are denominated in U.S. dollars unless otherwise indicated.

The Company is in the business of
developing, marketing, distributing and supporting software and Internet
products for the automotive sales finance industry. The Company also previously
supplied a seasonal lead generation product that facilitates tax-refund loans
which are primarily used for down payments on car loans. The assets associated
with this business segment, however, were sold on May 16, 2006. During the nine
months ended October 31, 2007, the Company operated two CAC dealerships and a
third location under its JV1 joint venture, all of which sell and finance used
automobiles. In addition, on October 1, 2007 the Company purchased for cash and
the assumption of minimal liabilities substantially all of the assets of Calcars
Corporations AB, Inc. and Astra Financial Services, Inc. (together, Calcars).
Calcars operated the fourth largest chain of buy-here pay-here auto
dealerships in the country with 26 dealerships throughout the Midwest, three of
which will be closed by the Company. By virtue of the acquisition, the Company
will operate 23 dealerships in Illinois, Indiana, Iowa, Kentucky, Nebraska, Ohio
and Oklahoma, in addition to the three dealerships it operates in Florida. The
cash for the transaction (the Closing Payment) was funded by SWC Services LLC
((SWC), an affiliate of Colossus Capital Fund, L.P. (Colossus), which was
the Companys senior lender. The Closing Payment was used to repay the
obligations of Calcars to its senior lender, which was also an affiliate of
Collossus. Notes receivable collection operations from these new dealerships are
included in operations from October 1, 2007 through October 31, 2007 in the
accompanying financial statements. Sales operations for these dealerships were
not authorized by the various states until after October 31, 2007.

Going concern assumption

While these financial statements have
been prepared on the basis of accounting principles applicable to a going
concern, several adverse conditions and events cast substantial doubt upon the
validity of this assumption.

The Company has incurred losses in the
current year (exclusive of the loss on derivative instruments and gain on debt
forgiveness) and in each of the past several years. The Company has a working
capital balance (excluding derivative liability) of $1,608,107 as at October 31,
2007. This becomes a working capital deficiency of $(8,723,210) when you include
the derivative liability of $10,331,317. The Companys continued existence is
dependent upon its ability to achieve profitable operations and to obtain
additional

4

---

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

|1. | ORGANIZATION AND BUSINESS (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | financing. The Company has expanded operations in its
      existing CAC dealerships and new dealerships with its recent acquisition.
      The Company believes that the new dealerships, combined with its existing
      software and consulting businesses will improve its operating cash flows
      going forward. However, there can be no assurance that the Company will
      achieve profitable operations or that financing efforts will be
      successful.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | If the going concern assumption were not appropriate to
      these financial statements, then adjustments would be necessary in the
      carrying values of assets and liabilities, the reported net loss and the
      balance sheet classifications used.                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | SUMMARY OF ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Inventory consists of used vehicles and is related to the
      Carbiz Auto Credit operations. Inventory is stated at the lower of cost or
      net realizable value. Cost is determined on a specific item
  basis.                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Deferred finance costs                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Deferred financing costs related to the
convertible debentures and line of credit discussed in Notes 3 and 6 are
amortized over the respective terms of the debt to which the costs related.
Future amortization of these costs is expected to be as follows:

| | Periods ending October 31 |  |   |           | 
| | ------------------------- |  | - | --------- | 
| | 2008                      |  | $ | 707,481   | 
| | 2009                      |  |   | 495,956   | 
| | 2010                      |  |   | 306,250   | 
| | 2011                      |  |   | 280,729   | 
| |                           |  | $ | 1,790,416 | 

Earnings per share

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

The weighted average number of common
shares outstanding (basic) for the nine months ended October 31, 2007 does not
include 3,400,000 non-vested restricted shares issued for the 2007 Incentive
Stock Plan, 30,000,000 shares pledged in support of the February 28, 2007
Trafalgar Debentures (as defined in Note 3(a) herein), 8,438,041 common share
options outstanding, or the warrants outstanding which are summarized in Notes 4
and 7(g) herein because their inclusion might decrease the loss per share.
Potentially dilutive instruments include the options mentioned above
(8,438,041), warrants per note 7(g) (34,240,271), and shares underlying the
various convertible debentures (26,363,636), the three totaling
(69,041,948).

Stock-based compensation

No stock options were granted during
the nine months ended October 31, 2007.

During the nine months ended October
31, 2007, the Company recognized stock-based compensation expense of $84,000 as
a result of new options issued on January 19, 2007. See Note 12(e) to the
January 31, 2007 Form 10-KSB.

In addition, on January 25, 2007, the
  Company awarded 3,400,000 common shares as restricted stock to certain directors,
  officers, and key employees of the Company. During the nine months ended October
  31,

5

---

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

|2. | SUMMARY OF ACCOUNTING POLICIES
  (continued)
|-- | --------------------------------------------

Stock-based compensation
(continued)

2007 the Company recognized stock-based
compensation expense of $96,900 as a result of this restricted stock
transaction. See Note 11 to the January 31, 2007 Form 10KSB.

Total options outstanding and vested at
October 31, 2007 were 2,838,041 with a weighted average exercise price of $0.23
per share and a weighted average life of 1.5 years. The market value of our
shares at October 31, 2007 was $0.25, therefore the intrinsic value of all
options outstanding and vested at October 31, 2007 was $56,761. In addition,
non-vested options of 5,600,000 were outstanding at October 31, 2007 with an
exercise price of $0.13 per share and life of 4.2 years. The Company expects to
record a total of an additional $348,756 of compensation expense during periods
subsequent to October 31, 2007 for non-vested options as of that date.

Derivative Instruments

We review the terms of our convertible
debt and equity instruments to determine whether there are embedded derivative
instruments, including the embedded conversion option, that are required to be
bifurcated and accounted for separately as a derivative financial instrument. In
circumstances where the convertible instrument contains more than one embedded
derivative instrument, including the conversion option, that is required to be
bifurcated, the bifurcated derivative instruments are accounted for as a single,
compound derivative instrument. Also, in connection with the sale of convertible
debt and equity instruments, we may issue freestanding options or warrants that
may, depending on their terms, be accounted for as derivative instrument
liabilities, rather than as equity.

For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially
recorded at its fair value and is then re-valued at each reporting date, with
changes in the fair value reported as charges or credits to operations. We
estimate fair values of derivative financial instruments using various
techniques (and combinations thereof) that are considered to be consistent with
the objective of measuring fair value. In selecting the appropriate technique,
we consider, among other factors, the nature of the instrument, the market risks
that it embodies and the expected means of settlement.

For less complex derivative
instruments, such as freestanding warrants, we generally use the
Black-Scholes-Merton option valuation model because it embodies all of the
requisite assumptions (including trading volatility, estimated terms and risk
free rates) necessary to fair value these instruments. For complex derivative
instruments, such as embedded conversion options, we generally use the Flexible
Monte Carlo valuation technique because it embodies all of the requisite
assumptions (including credit risk, interest-rate risk and exercise/conversion
behaviors) that are necessary to fair value these more complex instruments.
Estimating fair values of derivative financial instruments requires the
development of significant and subjective estimates that may, and are likely to,
change over the duration of the instrument with related changes in internal
factors and external market indicators. In addition, option based techniques are
highly volatile and sensitive to changes in our trading market price which has a
high-historical volatility. Since derivative financial instruments are initially
and subsequently carried at fair values, our income reflects the volatility in
these estimate and assumption changes.

EFFECT OF RECENT ACCOUNTING
PRONOUNCEMENTS

The Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 141 (revised
2007), Business Combinations(FAS 141(R)) and No. 160, Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51(FAS 160).

The adoption of FAS 141 (R) will not
impact the October 31, 2007 statements of the Company and the effect of FAS 160,
when adopted, has not been determined. FAS 141(R) and FAS 160 will be effective
for the Company for all financial periods beginning in Fiscal 2009 ending on
January 31, 2009.

6

---

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

|3. | CONVERTIBLE DEBENTURES  2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (a) Trafalgar February 28, 2007 Financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On February 28, 2007 the Company sold $2,500,000 Secured
      Convertible Debentures (February Trafalgar Debentures) to Trafalgar
      Capital Specialized Investment Fund, Luxembourg (Trafalgar). Of this
      amount, $1,000,000 was released upon execution (March 2, 2007), $750,000
      was released after the Company filed a Registration Statement on Form SB-2
      (April 17, 2007) and the $750,000 balance was released on June 27, 2007.
      The February Trafalgar Debentures bear an interest rate of 12% compounded
      monthly from the date of issuance until the Company filed the Registration
      Statement (April 17, 2007), 10% compounded monthly from the date the
      registration was filed until it becomes effective, and 8% per annum
      thereafter until the Febreuary Trafalgar Debentures are paid in full. The
      Company responded to initial SEC comments and filed an amended
      Registration Statement on July 9, 2007 and a second amendment on August
      30, 2007. This Registration Statement never became effective and the
      liquidated damages provision of the registration rights agreement applied
      in September, 2007. See comment on this matter below.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The February Trafalgar Debentures are convertible at
      Trafalgars option into common shares of the Company at a price per share
      equal to the lesser of (i) US$0.22 or (ii) 85% of the lowest daily closing
      bid price of the Companys common shares, as quoted by Bloomberg, L.P. for
      the five trading days immediately preceding the date of conversion. The
      February Trafalgar Debentures are secured by a pledge of 30,000,000 common
      shares of the Company. These shares are held in escrow, not considered
      issued and outstanding and, therefore, they are not considered in earnings
      per share calculation. See Note 2 herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | As mentioned above, the filing of the Companys
      Registration Statement resulted in the release of the second tranche of
      funding ($750,000 on April 17, 2007), and the third tranche ($750,000 on
      June 27, 2007) provided, further, that failure by the Company to have it
      declared effective could result in the Company having to pay liquidated
      damages to Trafalgar. Trafalgar did advise the Company on September 21,
      2007 that $40,000 of liquidated damages was due and the amount was
      deducted from the procceds of the September 26, 2007 financing described
      in Note (c) below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In addition, the Company issued to Trafalgar warrants to
      purchase up to an aggregate of 2,500,000 common shares of the Company at a
      strike price of US$0.15 per share, exercisable over the next 5
    years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | When we evaluated the February Trafalgar Debentures and
      warrants, we concluded that equity classification was not appropriate
      under EITF 00-19, Accounting for Derivative Financial Instruments Indexed
      to, and Potentially Settled in, a Companys Own Stock. Accordingly we
      allocated proceeds from the debentures to the detachable warrants, the
      compound derivative embedded in the convertible debenture, and the
      convertible debenture itself in the amounts of $562,500, $1,657,833, and
      $355,685 respectively, based upon the fair values of these financial
      instruments. The compound derivatives arising from bifurcation comprises
      (i) the embedded conversion option, (ii) mandatory redemption feature,
      (iii) equity-interest payments, and (iv) cash payable puts. Because the
      aggregate fair values of these derivative instrument liabilities exceeded
      the gross proceeds, we recognized a day-one derivative loss amounting to
      $101,058.                                                                                                                                                                                                      

The convertible debentures are payable
interest only through January 2008 and thereafter in monthly installments
through February 2009, at which time the then remaining $700,000 balance is due.
Annual principal maturities are as follows:



| | Periods ending October 31 |  |   |              | 
| | ------------------------- |  | - | ------------ | 
| | 2008                      |  | $ | 750,000      | 
| | 2009                      |  |   | 1,750,000    | 
| |                           |  |   | 2,500,000    | 
| | Less unamortized discount |  |   | (1,973,359 ) | 
| |                           |  | $ | 526,641      | 

7

---

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

|3. | CONVERTIBLE DEBENTURES  2007
(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On August 31, 2007 the Company sold $1,000,000 Secured
      Convertible Debentures to Trafalgar (August Trafalgar Debentures). The
      August Trafalgar Debentures bear an interest rate of 12% compounded
      monthly from the date of issuance and have interest rate reduction
      provisions similar to the February Trafalgar financings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Trafalgar Debentures are convertible at Trafalgars
      option into common shares of the Company at a price per share similar to
      the February Trafalgar financings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In addition, the Company issued to Trafalgar warrants to
      purchase up to an aggregate of 2,000,000 common shares of the Company,
      with 1,000,000 shares subject to purchase at US$0.15 per share and
      1,000,000 shares subject to purchase at US$0.22 per share, exercisable
      over the next 3 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | When we evaluated the August Trafalgar Debentures and
      warrants, we concluded that equity classification was not appropriate
      under EITF 00-19, Accounting for Derivative Financial Instruments Indexed
      to, and Potentially Settled in, a Companys Own Stock. Accordingly we
      allocated proceeds from the debentures to the detachable warrants, the
      compound derivative embedded in the convertible debenture, and the
      convertible debenture itself in the amounts of $380,200, $954,394, and $0
      respectively, based upon the fair values of these financial instruments.
      The compound derivatives arising from bifurcation comprises (i) the
      embedded conversion option, (ii) mandatory redemption feature, (iii)
      equity-interest payments, and (iv) cash payable puts. Because the
      aggregate fair values of these derivative instrument liabilities exceeded
      the gross proceeds, we recognized a day-one derivative loss amounting to
      $133,141.

The convertible debentures are payable
interest only through January 2008 and thereafter in monthly installments
through August 2009, at which time the then remaining $700,000 balance is due.
The Company has also agreed to a redemption feature under which all proceeds
generated by the exercise of previously issued non-Trafalgar warrants will be
used to make principal payments towards any remaining balance. Accordingly, some
previously issued non-Trafalgar warrants were exercised and the proceeds applied
to the Convertible Debenture balance.

Annual principal maturities are as
follows:



| | Periods ending October 31 |  |   |             | 
| | ------------------------- |  | - | ----------- | 
| | 2008                      |  | $ | $ 1,000,000 | 
| |                           |  |   | $ 1,000,000 | 
| | Less unamortized discount |  |   | (964,947 )  | 
| |                           |  | $ | $ 35,053    | 

| | (c) | Trafalgar September 26, 2007 Financing | 
| | --- | -------------------------------------- | 

On September 26, 2007 the Company sold
$1,500,000 Secured Convertible Debentures (September Trafalgar Debentures) to
Trafalgar. The September Trafalgar Debentures bear an interest rate of 11%
compounded monthly.

The Trafalgar Debentures are
convertible at Trafalgars option into common shares of the Company at a price
per share equal to the lesser of (i) US$0.22 or (ii) 85% of the lowest daily
closing bid price of the Companys common shares, as quoted by Bloomberg, L.P.
for the five trading days immediately preceding the date of conversion.

In addition, the Company issued to
Trafalgar warrants to purchase up to an aggregate of 2,000,000 common shares at
any time until September 26, 2010, with 500,000 shares at US$0.01 per share,
500,000 shares at

8

---

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

|3. | CONVERTIBLE DEBENTURES  2007
  (continued)
|-- | -------------------------------------------

US$0.10 per share, 500,000 shares at
US$0.15 per share and 500,000 shares subject to purchase at US$0.22 per share.
Other terms are similar to the previous Trafalgar transactions.

When we evaluated the September
Trafalgar Debentures and warrants, we concluded that equity classification was
not appropriate under EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock.
Accordingly we allocated proceeds from the debentures to the detachable
warrants, the compound derivative embedded in the convertible debenture, and the
convertible debenture itself in the amounts of $495,250, $1,420,975, and $-0-
respectively, based upon the fair values of these financial instruments. The
compound derivatives arising from bifurcation comprises (i) the embedded
conversion option, (ii) mandatory redemption feature, (iii) equity-interest
payments, and (iv) cash payable puts. Because the aggregate fair values of these
derivative instrument liabilities exceeded the gross proceeds, we recognized a
day-one derivative loss amounting to $303,371.

The September Trafalgar Debentures have
  a maturity date of September 26, 2009 and are payable interest only for the
  first eight months. Beginning in June 2008, the Company must pay $71,660 per
  month in principal and interest. The Company must also pay a redemption premium
  on the amount of each monthly payment, which premium starts at 7% for June 2008,
  and increases by 1% per month. The Company will have a balloon payment of $848,333
  on September 26, 2009. Annual principal maturities are as follows:



| | Periods ending October 31 |  |   |             | 
| | ------------------------- |  | - | ----------- | 
| | 2008                      |  | $ | 289,550     | 
| | 2009                      |  |   | 1,210,450   | 
| |                           |  |   | 1,500,000   | 
| | Less unamortized discount |  |   | (1,456,458) | 
| |                           |  | $ | 43,542      | 

As discussed above, Trafalgar deducted
  $40,000 from the proceeds of this financing for registration rights liquidated
  damages on the February Trafalgar financings. See further notes on registration
  liquidated damages on Trafalgar financings elsewhere in this report.



|(d) | Private Placement October 1, 2007
      Financing | 
|--- | ------------------------------------------------- | 

On October 1, 2007, the Company
completed an $800,000 financing with a group of investors (Purchasers), each
of which are related parties, by issuing to them debentures with a face amount
of $800,000 and which have a maturity date of December 1, 2011 (October
Debentures). (See Note 9.). The October Debentures bear an interest rate of 11%
compounded monthly. Interest on the debentures will accrue for the first 24
months, compounded monthly, and thereafter be payable on the outstanding
principal amount on a monthly basis until paid. Principal payments in the amount
of $35,555.56 will be payable monthly beginning October 1, 2009, with the
balance due at maturity. The principal due under the October Debentures will not
be paid until after the Trafalgar debentures are paid.

The October Debentures are convertible
at the Purchasers option into common shares of the Company at a price per share
equal to the lesser of (i) US$0.22 or (ii) 85% of the lowest daily closing bid
price of the Companys common shares, as quoted by Bloomberg, L.P. for the five
trading days immediately preceding the date of conversion. The October
Debentures have terms substantially equivalent to those purchased by Trafalgar,
except that the principal due under the October debentures will not be paid
until after the Trafalgar debentures are paid, and the October Debentures are
unsecured.

In addition, the Company issued to the
Purchasers warrants to purchase up to an aggregate of 1,066,667 common shares at
any time until September 26, 2010, with 266,666 shares at US$0.01 per share,
266,667 shares at US$0.10 per share, 266,667 shares at US$0.15 per share and
266,667 shares subject to purchase at US$0.22 per share.

9

---

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

|3. | CONVERTIBLE DEBENTURES  2007
  (continued)
|-- | -------------------------------------------

When we evaluated the October
Debentures and warrants, we concluded that equity classification was appropriate
for the warrants under EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock.
Accordingly we allocated proceeds from the debentures to the detachable warrants
on a relative fair value basis, the compound derivative embedded in the
convertible debenture, and the convertible debenture itself in the amounts of
$133,814, $896,800, and $ 16,000 respectively, based upon the fair values of
these financial instruments. (The embedded compound derivative did not qualify
for equity accounting). The compound derivatives arising from bifurcation
comprises (i) the embedded conversion option, (ii) mandatory redemption feature,
(iii) equity-interest payments, and (iv) cash payable puts. Because the
aggregate fair values of these derivative instrument liabilities exceeded the
gross proceeds, we recognized a day-one derivative loss amounting to
$230,614.



| | Periods ending October 31       |  |   |           | 
| | ------------------------------- |  | - | --------- | 
| | 2008                            |  | $ | -         | 
| | 2009                            |  |   | 35,556    | 
| | 2010                            |  |   | 426,667   | 
| | 2011                            |  |   | 337,777   | 
| |                                 |  | $ | 800,000   | 
| | Less unamortized
      discount |  |   | (782,095) | 
| |                                 |  |   | $ 17,905  | 

As of October 31, 2007 the Company had
outstanding Convertible Debentures as follows:

Amounta) 2007 Trafalgar Convertible Debenture
        February 28, 2007
    $
    526,641b) 2007 Trafalgar Convertible Debenture August 31,
        2007
    
    35,053c) 2007 Trafalgar Convertible Debenture
        September 26, 2007
    
    43,542d) 2007 Private Placement Convertible Debenture October
        1, 2007
    
    17,905$
    623,141


|4. | WARRANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On August 24, 2007 the Company issued warrants to
      Knightsbridge Consulting for 1,000,000 common shares at $0.15. The
      warrants expire on February 28, 2011. Fair value at date of issuance using
      the Black-Scholes- Merton formula was approximately $140,000. These
      warrants were determined to be compensation and recorded in additional
      paid in capital at the fair value. At October 31, 2007 the $140,000
      warrant compensation expense was recorded in Other Operating
    Expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | CALCARS ACQUISITION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On October 1, 2007, the Company completed its acquisition
      of substantially all of the assets of Calcars AB, Inc. and Astra Financial
      Services, Inc., each of which were solely owned by John Calcott (together,
      Calcars). The Company made this acquisition through a newly formed
      wholly-owned subsidiary, Carbiz Auto Credit AQ, Inc. Calcars operated the
      fourth largest chain of buy-here pay-here auto dealerships in the US
      with 26 dealerships throughout the Midwest, three of which will be closed
      by the Company. By virtue of the acquisition, the Company will operate 23
      dealerships in Illinois, Indiana, Iowa, Kentucky, Nebraska, Ohio and
      Oklahoma, in addition to the three dealerships it operates in Florida. The
      primary purpose of this acquisition was to combine the Calcars locations
      with the Carbiz locations and to utilize the Carbiz suite of business
      solutions, which include dealer software products focused on the buy-here
      pay-here markets, to move Carbiz forward with its previously announced
      growth plans. Calcars operations are included from October 1, 2007 in the
      results of opertions for the three months and nine months ended October
      31, 2007.

10

---

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

|5. | CALCARS ACQUISITION
(continued)
|-- | -------------------------------

The consideration paid by the Company
  to Calcars consisted of cash in the amount of approximately $18.6 million (the
  Closing Payment) plus the assumption of certain liabilities of Calcars.
  The Closing Payment was funded by a line of credit provided to the Company by
  SWC Services LLC (SWC), an affiliate of Colossus Capital Fund, L.P.
  (Colossus), which was the Companys senior lender. The Closing
  Payment was used to repay the obligations of Calcars to its senior lender, which
  was also an affiliate of Colossus.

The asset purchase has been accounted
for under the purchase method of accounting in accordance with Statement of
Financial Accounting Standards (SFAS) No. 141, Business Combinations.The
preliminary allocation of the purchase price is based upon estimates of the fair
values of the assets acquired and liabilities assumed. The total purchase price
has been allocated to assets acquired and liabilities assumed based on
managements best estimates of fair value, and there was zero excess cost over
net tangible and identifiable intangible assets acquired to allocate to
goodwill.

The following table represents the
preliminary allocation of the purchase price for our acquisition of Calcars.

The total purchase price of the
acquisition is as follows:

| |                                    |   | Fair Values at October 1, 2007 | 
| | ---------------------------------- | - | ------------------------------ | 
| | Notes receivable, net of reserves  | $ | 18,525,497                     | 
| | Vehicle Inventory, net of reserves |   | 205,390                        | 
| | Property and Equipment             |   | 514,057                        | 
| | Total purchase price               | $ | 19,244,944                     | 

The transaction was funded as
follows:

| | Cash  funded by new line of credit | $ | 18,559,709 | 
| | ----------------------------------- | - | ---------- | 
| | Current liabilities assumned        |   | 685,235    | 
| | Total consideration                 | $ | 19,244,944 | 

The estimated values of Notes Receivable
  were based upon their expected collections net of reserves for uncollectable
  accounts. No present value calculations were considered due to their short-term
  nature (18  22 months). These notes bear interest at rates approximating
  market rates for loans with similar credit characteristics. Vehicle Inventory
  was valued at estimated selling prices less the cost of refurbishment and a
  reasonable profit allowance for the selling effort. Very few of these vehicles
  were deemed appropriate for resale to customers by Carbiz. As such, most vehicles
  were returned to wholesale dealers in the area. Property and equipment was also
  estimated based upon its historical net book value as there was no appreciated
  real estate and the historical net book value of the office equipment, furniture
  and computers most closely approximated fair value.

Calcars offered a vehicle replacement
  program (VSP) where, under certain circumstances, customers may
  return vehicles and Calcars will provide the customer with a replacement vehicle.
  Although Carbiz will not offer this program it will honor existing Calcars contracts
  under this program. The related warranty liability has been accured.

The following unaudited pro forma
financial information gives effect to the Calcars acquisition, as if it had
occurred at the beginning of the respective period. Unaudited pro forma
information is not necessarily indicative of the results of operations that
would have occurred had the acquisition taken place at the beginning of those
periods.

11

---

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

|5. | CALCARS ACQUISITION
(continued)
|-- | -------------------------------

| |                                                              |   | Nine months ended October 31 |  
| | ------------------------------------------------------------ | - | ---------------------------- | -
| |                                                              |   | 2007                         |  
| | Proforma consolidated revenue                                | $ | 23,581,000                   |  
| | Proforma consolidated net loss                               | $ | (7,402,000                   | )
| | Proforma consolidated basic and
      diluted loss per share | $ | (0.11                        | )

In order to effectuate the acquisition,
the Company entered into an amended and restated credit agreement with SWC
Services LLC (SWC). See Note 6 below. In connection with such amendment, SWC
required that the Company obtain additional subordinated debt funding, which the
Company obtained through the issuance of additional subordinated debentures to
Trafalgar (the August 31, 2007 and September 26, 2007 financings), and a group
of individual investors (the October 1, 2007 financing) which include certain
directors of the Company and their affiliates. See Note 9.

6.
    LINE OF CREDIT AND TERM LOAN
  FINANCING

On October 1, 2007, the Company entered
into an Amended and Restated Loan and Security Agreement (the Amended Credit
Agreement) with SWC Services LLC, as initial lender and administrative agent,
the other lenders who become a party to the Amended Credit Agreement from time
to time (collectively, the Lenders), and AGM, LLC as Additional Collateral
Agent. SWC Services LLC is an affiliate of the Companys former senior lender,
Colossus Capital Fund, L.P.

The Amended Credit Agreement has a
maximum commitment of $30 million, including a $23 million revolving receivable
loan facility, a $2 million revolving floor plan loan facility, and a term loan
in the amount of up to $21.925 million. The revolving receivable loan facility
and revolving floor plan loan facility will expire on October 1, 2011, and the
term loan has a maturity date of April 1, 2011.

The Company borrowed approximately
$18.6 million under the term loan to finance the repayment of the senior debt of
Astra Financial Services, Inc. and Calcars AB, Inc., in connection with the
transaction discussed in Note 5. The Company had the right up to an additional
$2.325 million under the term loan on November 1, 2007, and the remaining $1
million on January 2, 2008. Accordingly, the Company borrowed $2.285 million of
this amount, and the remainder of the November 1, 2007 commitment expired. The
commitment for the additional $1 million under the term loan will expire at the
close of business on January 2, 2008, if any of such funds are not drawn on such
date. The November and January draws under the term loan, as well as the
revolving receivable loan facility and revolving floor plan loan facility, may
be used to finance the Companys working capital needs.

The Amended Credit Agreement is secured
by a first priority interest in all the existing and after acquired tangible and
intangible assets of the Company and its subsidiaries.

All borrowings under the Amended Credit
Agreement will accrue interest at 12% per annum until September 30, 2008.
Beginning October 1, 2008, through January 31, 2009, the interest rate on the
term loan will increase to 18% per annum; beginning February 1, 2008, through
July 31, 2009, the interest rate on the term loan will increase to 21% per
annum; beginning August 1, 2009, through January 31, 2010, the interest rate on
the term loan will increase to 24% per annum. Payment of all interest on the
term loan in excess of 12% per annum will be deferred until February 1, 2010, on
which date all such deferred interest will be due and payable, unless waived as
described below.

All deferred interest on the term loan
as described above will be waived by the lenders as follows: the interest rate
will be 12% per annum for any time between October 1, 2008 and January 31, 2009
when the outstanding principal balance of the term loan is less than $7,500,000;
the interest rate will be 12% per annum for any time between February 1, 2009
and July 31, 2009 when the outstanding principal balance of the term loan is
less than $4,000,000; and the interest rate will be 12% per annum for any time
between August 1, 2009 and January 31, 2010 when the outstanding principal
balance of the term loan is less than $2,000,000.

12

---

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

|6. | LINE OF CREDIT AND TERM LOAN FINANCING
      (continued)
|-- | --------------------------------------------------------

Beginning February 1, 2010, through
January 31, 2011, the interest rate on the term loan will increase to 28% per
annum. Thereafter, the interest rate on the term loan will increase by 3% per
annum every six months until paid.

Upon the occurrence and during the
continuance of an event of default under the Amended Credit Agreement, the
applicable interest rate will be increased by 6% per annum.

Under the term loan agreement, all
payments collected from consumer loans acquired in the Calcars purchase are
applied to principal and accrued interest of the term loan. The amount of
payments expected to be collected and applied to the principal balance during
the next twelve months is shown on the balance sheet as the current portion of
long term debt. Any outstanding balance due under the term loan is required to
be repaid in twelve equal monthly installments beginning May 1, 2010.

The Company must pay a termination fee
if the Amended Credit Agreement is fully repaid and terminated prior to its
scheduled maturity date. If the Amended Credit Agreement is repaid during the
first 12 months, the fee is 4.00% of the total outstanding balance due under the
receivables facility and the floor plan facility; if it is repaid during months
13 through 24, the fee is 3.00%; if it is repaid during months 25 through 36,
the fee is 2.00%; and if it is repaid during months 37 through 48, the fee is
1.00% .

Under the terms of the Amended Credit
Agreement, the Company was required to pay a facility commitment fee of $150,000
to the Lenders upon the signing of the Amended Credit Agreement, but the asset
management fees and unused line fees were eliminated. The Company will also
reimburse the Lenders for certain reasonable expenses for financial, legal and
collateral due diligence in connection with the Amended Credit Agreement.

The Company paid a fee of $875,000 to
GVC Financial Services, LLC, $225,000 of which was for consulting services, in
connection with this financing pursuant to the term of its agreement for the
representation of the Company for the facilitation of financing facilities,
dated December 18, 2006. There were an additional $350,000 of transaction fees
for an aggregate of $1,225,000. (Included in deferred financing cost on the
October 31, 2007 balance sheet).

The Amended Credit Agreement also
contains customary covenants and provides for customary events of default. At
October 31, 2007 the Company had total outstanding borrowings under the Amended
Credit Agreement as follows:

AmountRevolving line of credit
      $
    310,597Term Loan
    
    19,574,623Total line of credit including long-term
        portion
    $
    19,885,220Inventory floor plan
    $
    350,000


At October 31, 2007 interest expense
from commencement of the facility through October 31, 2007 was $217,774. The
Company had incurred approximately $446,087 of deferred financing costs from the
original February, 2007 line of credit, the unamortized balance at October 1,
2007 of $409,533 was written off as a loss on impairment.

13

---

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

|7. | DERIVATIVE LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In accordance with EITF 00-19, these warrants were
      determined to be classified as derivative liabilities and marked to market
      each reporting period, with a corresponding non-cash gain or loss
      reflected in the current period. On August 3, 2007 a warrant holder
      exercised 460,500 warrants resulting in approximately $52,500 in proceeds.
      The warrant holder is the spouse of an executive officer of the
      company.                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On September 27, 2007 a second warrant holder exercised
      416,617 warrants resulting in approximately $50,000 in proceeds. These
      proceeds were used to make a principal payment under the terms of the
      August Trafalgar Debenture financing. Accordingly a $3,750 early payment
      penalty was incurred and has been included in interest expense.                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As described in Note 9(a) and (e) of the January 31, 2007
      Form 10-KSB, the Company had engaged an agent for the 2004 Convertible
      Debenture financing. Accordingly, the Company also issued as of October 3,
      2006 438,100 common share purchase warrants, with each warrant exercisable
      for one common share until October 3, 2011 at an exercise price of
      CDN$0.23, and 438,100 common share purchase warrants, with each warrant
      exercisable for one common share until October 3, 2011 at an exercise
      price of CDN$0.22. These 876,200 warrants were determined to be derivative
      liabilities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As a result of an unregistered sale of equity securities
      in September, 2006 the Company issued 2,400,000 of share purchase warrants
      for two years at an exercise price of $0.15. Concurrently, related party
      debt held by two directors of the Company was converted to common shares
      and the Company issued 1,565,464 share purchase warrants under the same
      terms. These 3,965,464 warrants were determined to be derivative
      liabilities.                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As described in Note 3(a) herein, the Company issued
      2,500,000 share purchase warrants for five years and an embedded compound
      derivative in conjunction with the February Trafalgar Debenture financing
      and these instruments were determined to be derivative
  liabilities.                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As described in Note 3(b) herein, the Company issued
      2,000,000 share purchase warrants for three years and an embedded compound
      derivative in conjunction with the August Trafalgar Debenture financing
      and these instruments were determined to be derivative
  liabilities.                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As described in Note 3(c) herein, the Company issued
      2,000,000 share purchase warrants for three years and an embedded compound
      derivative in conjunction with the September Trafalgar Debenture financing
      and these instruments were determined to be derivative
  liabilities.                                                                                                                                                                                                                                                                                                                                             

14

---

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

|7. | DERIVATIVE LIABILITIES (continued)                                           
|-- | -----------------------------------------------------------------------------
|   |                                                                              
|   | (g) Total Warrants and Compound Derivative
      Liability                   
|   |                                                                              
|   | As of October 31, 2007 the Company had derivative
      liability as follows:

| |                                                                  |  | Warrants   |  |   | Amount     | 
| | ---------------------------------------------------------------- |  | ---------- |  | - | ---------- | 
| | 2004 Conversion Warrants expiring October
      6, 2009          |  | 9,462,400  |  | $ | 1,793,623  | 
| | 2004 Conversion Warrants expiring October 10, 2010               |  | 11,055,264 |  |   | 2,211,984  | 
| | 2004 Conversion Warrants expiring April
      6, 2011            |  | 314,276    |  |   | 62,885     | 
| | 2006 Private Placement Warrants expiring September 5,
      2008 |  | 3,965,464  |  |   | 594,820    | 
| | 2004 Agent Warrants expiring October
      6, 2011               |  | 876,200    |  |   | 166,086    | 
| | 2007 Trafalgar Warrants expiring February 28, 2012               |  | 2,500,000  |  |   | 580,250    | 
| | 2007 Trafalgar Embedded Derivative February
      28, 2007       |  | -          |  |   | 1,698,155  | 
| | 2007 Trafalgar Warrants expiring August 31, 2010                 |  | 2,000,000  |  |   | 442,400    | 
| | 2007 Trafalgar Embedded Derivative August
      31, 2007         |  | -          |  |   | 592,285    | 
| | 2007 Trafalgar Warrants expiring September 26, 2010              |  | 2,000,000  |  |   | 459,400    | 
| | 2007 Trafalgar Embedded Derivative September
      26, 2007      |  | -          |  |   | 1,118,930  | 
| | 2007 Private Placement Embedded Derivative October 1,
      2007 |  | -          |  |   | 610,499    | 
| |                                                                  |  | 32,173,604 |  | $ | 10,331,317 | 

|   | This derivative liability is adjusted quarterly based on
      a value model discussed in Note 2 herein and any changes in fair value are
      recorded as gain or loss on derivative financial instruments in the
      consolidated statements of operations. In addition to the warrants
      included as Derivative Liabilities in the table above, the Company has two
      additional warrants included as equity: Private Placement October 1, 2007
       1,066,667; and Knightsbridge Warrants: 1,000,000.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|8. | CASH FLOW INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                                                |   | Nine months ended | 
| | ---------------------------------------------- | - | ----------------- | 
| |                                                |   | October 31, 2007  | 
| | Cash paid during the period for
      Interest | $ | 229,352           | 

(b)
    Supplemental non-cash
  information

During the nine months ended October
31, 2006, the Company converted certain convertible debentures (see Note 4)
which were treated as a conversion of debt and issuance of common shares in the
amount of $1,406,529 and as such have not been included in the statement of cash
flows. Interest of $76,805 for the Debenture conversion and interest of $28,895
for related party debt were exchanged for common shares totaling $105,600. See
Note 9(a) to January 31, 2007 Form 10-KSB. During the nine months ended October
31, 2007, the Company issued $5,800,000 of Convertible Debentures in which
$1,162,251 of proceeds were allocated to and capitalized as deferred financing
costs.

As part of the Calcars acquisition
described in Note 5, the Company assumned current liabilites of $685,235.

9.
    RELATED PARTY TRANSACTIONS

On February 28, 2005, the Company
entered into a joint venture agreement (JV1) with a member of the Company's
Board of Directors (the JV1 Agreement). The purpose of this joint venture was
to add five additional CAC centers in the state of Florida over five years.
Under the JV1 Agreement, the Company contributed its intellectual property and
permanent, non-exclusive license agreements in exchange for a 50% share of the
joint venture. The director/joint venture partner contributed $500,000 for the
remaining 50%

15

---

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

|9. | RELATED PARTY TRANSACTIONS
  (continued)
|-- | ----------------------------------------

share. In April 2005, JV1 signed a
five-year lease for the premises of the first center, at a price of $31,200
annually.

The Company accounts for the joint
venture using FASB Interpretation No. 46, Consolidation of Variable Interest
Entities.The primary objectives of this interpretation are to provide
guidance on the identification of entities for which control is achieved through
means other than through voting rights (variable interest entities) and how to
determine when and which business enterprise (the primary beneficiary) should
consolidate the variable interest entity. Because the joint venture is operated
as a CAC location and is fully integrated under the daily control and management
of the Company, the Company is, under this guidance, the primary beneficiary.
Accordingly operational revenue and expenses, and all assets and liabilities are
fully consolidated. The 50% share of the joint venture not owned by the Company
is presented on the Minority Interest line item on the Consolidated Balance
Sheets. A summary of 100% of the joint venture revenues and expenses and assets
are listed below:

Nine Months EndedOctober 31, 2007
    
    
      October 31, 2006Sales
    $
      388,869
    
    $
      244,305Cost of sales
    
      302,712
    
    
      201,090Gross Profit
    
      86,157
    
    
      43,215Operating Expenses (1)
    
      108,763
    
    
      86,656Operating Income (Loss)
    $
      (22,606
    )
    $
      (43,441
    )Depreciation
    
      (835
    )
    
      (835
    )Net Income (Loss)
    $
      (23,441
    )
    $
      (44,276
    )Total Assets
    $
      400,337
    
    $
      465,198


|    | During the fourth quarter of the fiscal year ended
      January 31, 2007 the Company borrowed $230,000 on a short term, informal,
      non-interest bearing basis from a company owned by a significant
      stockholder. The amount was paid off in June 2007 with some of the
      proceeds from a Trafalgar financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | As further described in Note 3(d), on October 1, 2007,
      the Company completed a financing with a group of investors, which include
      the spouse of Carl Ritter, Chief Executive Officer of the Company, the
      spouse of Vernon Haverstock, who is a director of the Company, Ross
      Quigley, Brandon Quigley, Theodore Popel and Christopher Bradbury, each of
      whom is a director of the Company, and certain companies or trusts
      controlled by them. A committee of the Board of Directors of the Company,
      composed of two directors who were not purchasing any of the debentures
      and warrants, approved the issuance of the debentures and warrants,
      finding the transaction to be in the best interest of the Company and the
      shareholders based upon the necessity for the Company to raise the
      additional funds quickly in order to be able to consummate the Calcars
      transaction (See Note 5), and the fact that the terms of the debentures
      and warrants contained the same terms as those issued to Trafalgar on
      September 26, 2007, except that the terms of the October 1, 2007
      debentures made them subordinate to both the Companys senior credit
      facilities and the debentures issued to Trafalgar, and the October 1, 2007
      debentures are unsecured.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10. | SEGMENT INFORMATION FOR CONTINUING
    OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company operates and manages its business in three
      segments, which are its used car sales and financing segment (Carbiz Auto
      Credit or CAC and its new acquisition Carbiz Auto Credit AQ or AQ),
      its used car sales and financing joint venture (JV1), and various
      software and consulting services offered to independent car dealerships
      (Software and Other Products). Approximately 99% of the Companys
      revenue is generated in the United States. In addition almost all of the
      Companys assets are located in the U.S. A fourth business segment,
      TaxMax, a tax preparation service, was sold on May 16, 2006. The Company
      has eliminated TaxMax from the segment information. See Note 11
    herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

16

---

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

|10. | SEGMENT INFORMATION FOR CONTINUING OPERATIONS (continued)
|--- | ---------------------------------------------------------

CAC purchases automobiles through auctions and sells them to
end users at three car lots located in the State of Florida. When required, the
Company will also finance these sales with loans that are generally 80 weeks in
length.

Software and Other Products consists of new sales and recurring
monthly revenues for software products, new sales and recurring monthly revenues
of consulting products, and other related revenue from credit bureau fees,
supply sales and forms programming.

17

---

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

|10. | SEGMENT INFORMATION FOR CONTINUING OPERATIONS
      (continued)
|--- | ---------------------------------------------------------------

|Three months
      ended October 31 | 2007
|----------------------------------- | ----
|                                    |     
|Sales                               | $   
|Cost of Sales                       |     
|Gross Profit                        |     
|Operating Expenses (1)              |     
|Income (Loss) From Segments         | $   
|Depreciation & Amortization         |     
|Total Operating Income (Loss)       |     
|                                    |     
|Total Assets                        | $   
|                                    | 2006
|Sales                               | $   
|Cost of Sales                       |     
|Gross Profit                        |     
|Operating Expenses (1)              |     
|Income (Loss) From Segments         | $   
|Depreciation & Amortization         |     
|Total Operating Income (Loss)       |     
|Total Assets                        | $   
|Nine months
      ended October 31  | 2007
|                                    |     
|Sales                               | $   
|Cost of Sales                       |     
|Gross Profit                        |     
|Operating Expenses (1)              |     
|Income (Loss) From Segments         | $   
|Depreciation & Amortization         |     
|Gain on Debt Forgiveness            |     
|Total Operating Income (Loss)       |     
|Total Assets                        | $   
|                                    | 2006
|Sales                               | $   
|Cost of Sales                       |     
|Gross Profit                        |     
|Operating Expenses (1)              |     
|Income (Loss) From Segments         | $   
|Depreciation & Amortization         |     
|Total Operating Income (Loss)       |     
|                                    |     
|Total Assets                        | $   

18

---

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

|11. | DISCONTINUED OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On May 16, 2006 the Company completed the sale of its
      TaxMax business to Tax Refund Services, Inc. located in Tampa, Florida.
      The proceeds of $442,000 received from the sale were used to expand CAC
      operations. The book value of the assets sold was $20,575, therefore, the
      Company realized a gain of $421,425 on the disposition. No reserves for
      disposition were deemed appropriate prior to the sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In accordance with SFAS No. 144, Accounting for the
      Impairment or Disposal of Long-Lived Assets (SFAS 144), the financial
      results of the TaxMax business have been presented as discontinued
      operations on the financial statements for all periods presented. The
      former segment had revenue of $253,004 for the period beginning February
      1, 2006 through May 16, 2006. The operating income for this period was
      $135,358 plus a gain on disposal of $421,425.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Since the October 1, 2007 acquisitions of the 26
      dealerships in the midwest, the Company increased its operating
      dealerships 29. In any large operation like this, as a result of market
      conditions the Company may start-up, transfer, or discontinue individual
      store locations from time to time. The Company does not consider the
      changes affecting individual stores to be subject to discontinued
      operations accounting. As previously announced, the Company is in the
      process of closing three of the midwest locations acquired as part of
      Calcars and inventory and receivables applicable to those locations will
      be redeployed within other locations. The Company has determined to
      re-deploy the use of its St. Petersburg, Florida dealership to collections
      and make ready only, and is transferring its sales functions to the two
      other Florida dealerships.                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|12. | COMMITMENTS AND CONTINGENCIES.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | As mentioned in the Notes outlining the various Trafalgar
      Convertible Debenture Financings, under certain circumstances, the Company
      is subject to liquidated damages for not having effective registrations in
      place on a timely basis for the underlying shares in the Trafalgar
      transactions. The Company has not recorded such possible penalties until
      the liability was incurred and the amounts due were fixed and
      determinable. $40,000 of liquidated damages were deducted from the
      proceeds of a Trafalgar transaction and recorded as interest expense at
      that time. In addition, on November 21, 2007 the Company was invoiced by
      Trafalgar for a total of $165,184 of liquidated damages. After deducting
      the $40,000 previously mentioned, the Company has recorded the remaining
      $125,184 as a third quarter interest expense. Since the registration
      rights agreements call for liquidated damages up to 15%, a remaining
      contingent liability of $209,816 remains under the $2,500,000 Trafalgar
      financing. In addition, the $1,000,000 August 31, 2007 and $1,500,000
      September 26, 2007 Trafalgar financings have similar registration rights
      provisions (limited to 15%) with contingent amounts of $150,000 and
      $225,000.

19

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

Overview

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

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

- Software product and support sales and business model consulting
  services through initial software license fees and subsequent support
  agreements, which provide monthly maintenance fees as well as through a
  combination of one-time consulting fees and monthly business analysis
  services.
- Direct auto sales and related financing (Carbiz Auto Credit centers) through our self provided on-site specialty finance business, which
  includes company owned locations as well as locations owned by our joint
  venture.

Historically, we have been
primarily in the business of developing, marketing and supporting products for
the North American automotive industry. Our client base is made up of used and
new automobile dealers, with over 80% of our clients specifically in the used
vehicle business.

In May 2004, we opened our first
Carbiz Auto Credit center in Palmetto, Florida as a result of our decision to
enter the direct automobile sales market. Our credit center is a used car
dealership that offers financing on-site to customers with poor credit through
the utilization of our software products and our Dealer Controlled Financing
(DCF) business model. Rather than continuing to focus only on our existing
software and consulting, it was our intent to expand and diversify our business
by opening additional credit centers in the future. In November 2004, our second
Carbiz Auto Credit location was opened in St. Petersburg, Florida, and our third
location was opened in Tampa, Florida in July 2005. On October 1, 2007, we
acquired substantially all of the assets and ongoing operations of twenty-six
credit center locations in the Midwest. The locations include eight locations in
Illinois, seven locations in Indiana, one location in Ohio, one location in
Kentucky, two locations in Iowa, three locations in Nebraska, and four locations
in Oklahoma. Subsequently, two locations in Illinois and one location in
Nebraska were merged into nearby locations. As a result of that acquisition, we
now operate a total of twenty-six Carbiz Auto Credit locations in eight
states.

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

Critical Accounting PoliciesRevenue Recognition

Our revenue is derived from the
sale of licenses, services and commissions, the sale of products to dealers in
the automobile industry and sale of used vehicles. We recognize revenue in
accordance with Statement of Position 97-2, Software Revenue Recognition,
issued by the American Institute of Certified Public Accountants in October 1997
as amended by Statement of Position 98-9 issued in December 1998 for all
software or software related revenue. For all non-software or non-software
related revenue, we recognize revenue in accordance with Securities and Exchange
Commission Staff Accounting Bulletin 104, Revenue Recognition, which was
preceded by Staff Accounting Bulletin 101, Revenue Recognition in Financial
Statements. For contracts involving multiple deliverables, where the
deliverables are governed by more than one authoritative accounting standard, we
generally apply the Financial

20

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Accounting Standards Board Emerging Issues Task Force Issue No.
00-21, Revenue Arrangements with Multiple Deliverables to determine whether
deliverables should be accounted for separately.

Our revenue from licenses is
recognized upon the execution of a license agreement, when the licensed product
has been delivered, fees are fixed or determinable, collection is probable and
when all significant obligations have been fulfilled. Related services revenue
is recognized when a signed contract has been executed, the services have been
delivered, and obligations have been fulfilled. We also sell and finance used
automobiles. The sale of vehicles is recognized once the customer takes delivery
and title has passed to the customer. In the case of financing of sold vehicles,
the interest is recognized over the term of the loan, which is generally 80
weeks, based on the principal outstanding at the time.

Use of Estimates

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

Stock-Based Compensation

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

Derivative Liability

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

21

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Three Month Financial Information

The following summary of selected
  financial information for the three months ended October 31, 2007 and 2006 is
  derived from, and should be read in conjunction with, and is qualified in its
  entirety by reference to, our interim financial statements, including the notes
  thereto, for periods ended October 31, 2007 and 2006.

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

|                                                   |   |            |   |  | % of    |   |  |            |   |  | % of    |  
|-------------------------------------------------- | - | ---------- | - |  | ------- | - |  | ---------- | - |  | ------- | -
|                                                   |   | October    |   |  | Revenue |   |  | October    |   |  | Revenue |  
|                                                   |   | 2007       |   |  |         |   |  | 2006       |   |  |         |  
|Revenue                                            | $ | 1,407,554  |   |  | 100.0   |   |  | 804,241    |   |  | 100.0   |  
|Cost of sales                                      | $ | 834,177    |   |  | 59.3    |   |  | 381,485    |   |  | 47.4    |  
|Gross profit                                       | $ | 573,377    |   |  | 40.7    |   |  | 422,756    |   |  | 52.6    |  
|Gain on debt forgiveness                           | $ | -          |   |  | -       |   |  | -          |   |  | -       |  
|Operating expenses                                 | $ | 1,668,164  |   |  | 118.5   |   |  | 852,113    |   |  | 106.0   |  
|Operating income (loss)                            | $ | (1,094,787 | ) |  | (77.8   | ) |  | (429,357   | ) |  | (54.6   | )
|Interest expense                                   | $ | (595,542   | ) |  | 42.3    |   |  | (47,767    | ) |  | 5.9     |  
|Gain (loss) on derivative instruments              | $ | (656,350   | ) |  | 46.6    |   |  | (2,817,530 | ) |  | 350.3   |  
|Write-off of deferred loan costs                   | $ | (409,533   | ) |  | 29.1    |   |  | -          |   |  | -       |  
|Minority interest income (loss)                    | $ | 10,687     |   |  | 0.8     |   |  | (1,302     | ) |  | 0.2     |  
|Net income (loss) from continuing
      operations | $ | (2,745,525 | ) |  | (195.1  | ) |  | (3,295,956 | ) |  | (409.8  | )
|Net income (loss) from discontinued operations     | $ | -          |   |  | -       |   |  | -          |   |  | -       |  
|NET INCOME (LOSS)                                  | $ | (2,745,525 | ) |  | (195.1  | ) |  | (3,295,956 | ) |  | (409.8  | )
|Income (loss) per common share                     | $ | (0.04      | ) |  |         |   |  | (0.07      | ) |  |         |  
|Total assets                                       | $ | 24,205,902 |   |  |         |   |  | 1,024,768  |   |  |         |  
|Long-term liabilities                              | $ | 10,022,920 |   |  |         |   |  | 141,766    |   |  |         |  

Revenue

In the three months ended October
31, 2007, our revenues from continuing operations increased by $603,313 compared
to our three-month revenue during the previous period ended October 31, 2006.
This increase was due to an increase of $637,152 in sales by our Carbiz Auto
Credit operating unit and a decrease of $39,211 in sales by our software and
consulting division during the three month period ending October 31, 2007 when
compared to the same period of 2006. Carbiz Auto Credit generated sales of
$832,021, including $716,036 from our Company-owned locations and $115,985 from
our joint venture location during the three months ended October 31, 2007. The
increase in revenue from our Company-owned locations was the result of
additional sales at existing locations compared to the same period ended October
31, 2006, as well as one month of interest income associated with the loan
portfolio acquired on October 1, 2007. As the full sales operations of the 23
acquired locations are reflected in subsequent periods, sales revenue will
increase in accordance with the increase in volume of cars sold and interest
income for those locations.

Cost of Sales

Our cost of sales expense
increased by $452,692 for the three months ended October 31, 2007, compared to
same period ended October 31, 2006. Carbiz Auto Credit operations cost of sales
increased by $386,400, including an increase in costs of $341,567 from our
Company-owned locations and an increase of $44,833 from our joint venture
location during the three months ended October 31, 2007, and all other parts of
the operation increased cost of sales by $66,292 during the three months ended
October 31, 2006. The increase in cost of sales in our Company-owned locations
was the result of additional sales at existing locations compared to the same
period ended October 31, 2006 as well as one month of costs associated with the
locations acquired on October 1, 2007. The increase in cost of sales in our
joint venture location was the direct result of additional sales compared to the
same period ended October 31, 2006. As the full sales operations of the 23
acquired locations are reflected in subsequent periods, cost of sales will
increase in accordance with the increase in volume of cars sold and car lot
staffing levels for those locations.

Expenses

For the three months ended October
  31, 2007, our operating expenses increased by $816,204 compared to the same
  period ended October 31, 2006. The Carbiz Auto Credit operating expenses increased
  by $600,933, including

22

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an increase of $579,810 from our Company-owned locations and an
increase of $21,123 from our joint venture location during the three months
ended October 31, 2007, while operating expenses for other segments increased by
$215,271 during the three months ended October 31, 2007. This increase was
primarily due to currency exchange expense and legal expenses related to the
preparation and closing of the acquisition, convertible debentures and amended
credit facility. Personnel expense and selling expense increased by a total of
$127,819 as a result of increased advertising and additional staff needed at our
corporate locations to support the 23 additional acquired locations.

While depreciation and
amortization expenses decreased by $153 for the three months ended October 31,
2007 as compared to the same period ended October 31, 2006, depreciation and
amortization expenses will increase in future periods as a result of fixed
assets acquired as part of the October 1, 2007 acquisition.

Interest Expense

Our interest and other expenses
increased by $547,775 for the three months ended October 31, 2007, compared to
the same period ended October 31, 2006, as a result of the closing of the four
convertible debentures and both the original and amended line of credit. The
convertible debenture financings incur interest expense and the write off of
deferred financing costs. The current line of credit balance reflects the total
borrowed against the acquired loan portfolio. We anticipate our interest expense
will increase over this and subsequent years related to the Trafalgar Debentures
and as we draw down on our credit facility with SWC Services LLC.

Gain/Loss on Derivative Instruments

Our loss on derivative
instruments decrease by $2,161,180 for the three months ended October 31, 277,
compared to the same period ended October 31, 2006. During the 2006 period, the
Company incurred non-cash expenses of $2,817,530, the majority being $2,509,602
of warrant liability for warrants issued in conjunction with the September, 2006
private placement and the October, 2006 conversion of previously issued
convertible debentures. During the 2007 period, the Company incurred non-cash
expenses of $656,350 for a variety of derivative liability related adjustments
to fair value and day one derivative losses on new financings.

Software Sales, Support and Consulting

This segment of our business
consists of new sales and recurring monthly revenue for software products and
new sales, new sales and recurring monthly revenue of consulting products, and
other related products including revenue from credit bureau fees, supply sales,
and forms programming. Our total software, consulting and other sales during the
three months ended October 31, 2007 decreased by $33,839 over the prior period
ended October 31, 2006.

Carbiz Auto Credit

On October 1, 2007, through our
newly formed wholly-owned subsidiary, Carbiz Auto Credit AQ, Inc., we completed
the acquisition of substantially all of the assets of Calcars AB, Inc. and Astra
Financial Services, Inc., each of which were solely owned by John Calcott
(together, "Calcars"). Under the terms of the transaction, we paid Calcars cash
in the amount of approximately $18.6 million (the "Closing Payment") and assumed
certain immaterial liabilities of Calcars. The Closing Payment was funded by SWC
Services LLC ("SWC"), an affiliate of Colossus Capital Fund, L.P. ("Colossus"),
which was our senior lender. The Closing Payment was used to repay the
obligations of Calcars to its senior lender, which was also an affiliate of
Colossus. We purchased substantially all of the fixed assets of Calcars and in
excess of $27 million in receivables.

Calcars was the fourth largest
chain of "buy-here pay-here" auto dealerships in the country. Calcars'
consolidated revenues for 2006 were more than $36 million, which would have
increased CarBiz revenues by almost 10 times. Before the acquisition, our CarBiz
Auto Credit division had established three buy-here pay-here dealerships in
Florida - all in the Tampa Bay region.

The purchase included a regional
office and 26 retail facilities in seven states. Three of the acquired stores
have been consolidated into nearby stores. The remaining 23 dealerships are
located in Illinois, Indiana, Iowa, Kentucky, Nebraska, Ohio and Oklahoma. It
also included a portfolio of consumer loans in excess of $27 million and fixed
assets valued in excess of $500,000.

The funding package for the
acquisition includes a senior credit facility with a maximum commitment of $30
million that provides for floor planning inventory, a term loan for acquiring
the assets and a credit facility to provide

23

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capital for growing the business. In the final three months of
our fiscal year, through January 31, 2008, we will apply CarBiz's proven
processes and techniques to the newly acquired locations, then work to optimize
results in the first quarter of next fiscal year.

The increase in sales activity
  during the three months ended October 31, 2007 was the result of an increase
  in inventory levels at our three existing locations due to an increase in cash
  available for the purchase of inventory after the closing and funding of the
  August and September Trafalgar Debentures and the credit facility under the
  amended agreement with SWC as well as the interest income generated during the
  final month of the period after the portfolio acquisition.

While the revenue total for the
  company owned locations reflects the interest income for one month after the
  Calcars acquisition, because those locations did not have dealer licenses during
  that time they did not produce any auto sales revenue. However, all car lot
  personnel costs for the one month period are reflected in the cost of sales
  total, resulting in a negative gross margin for the period.

Nine Month Financial Information

The following summary of selected
financial information for the nine months ended October 31, 2007 and 2006 is
derived from, and should be read in conjunction with, and is qualified in its
entirety by reference to, our interim financial statements, including the notes
thereto, for periods ended October 31, 2007 and 2006.

Nine months ended October 31, 2007 compared to the nine
months ended October 31, 2006

|                                                     |   | October    |   |  | % of    |   |   | October    |   |  | % of    |  
|---------------------------------------------------- | - | ---------- | - |  | ------- | - | - | ---------- | - |  | ------- | -
|                                                     |   | 2007       |   |  | Revenue |   |   | 2006       |   |  | Revenue |  
|Revenue                                              | $ | 3,231,530  |   |  | 100.0   |   | $ | 2,452,258  |   |  | 100.0   |  
|Cost of sales                                        | $ | 1,768,971  |   |  | 51.2    |   | $ | 1,308,047  |   |  | 53.3    |  
|Gross profit                                         | $ | 1,462,559  |   |  | 48.8    |   | $ | 1,144,211  |   |  | 46.7    |  
|Gain on debt forgiveness                             | $ | 391,337    |   |  | 21.5    |   | $ | -          |   |  | -       |  
|Operating expenses                                   | $ | 3,910,962  |   |  | 121.0   |   | $ | 2,161,494  |   |  | 88.1    |  
|Operating income (loss)                              | $ | (2,057,066 | ) |  | (63.7   | ) | $ | (1,017,283 | ) |  | (41.5   | )
|Interest and other expense                           | $ | (834,479   | ) |  | 25.8    |   | $ | (179,814   | ) |  | 7.3     |  
|Gain (loss) on derivative instruments                | $ | (1,408,092 | ) |  | 43.5    |   | $ | (2,817,530 | ) |  | 114.9   |  
|Write-off of deferred financing
      costs          | $ | (409,533   | ) |  | 12.7    |   | $ | -          |   |  | -       |  
|Minority interest income (loss)                      | $ | 11,721     |   |  | 0.4     |   | $ | 22,138     |   |  | 0.9     |  
|Net income (loss) from continuing
      operations   | $ | (4,697,449 | ) |  | (145.4  | ) | $ | (3,992,489 | ) |  | (160.0  | )
|Net income (loss) from discontinued
      operations | $ | -          |   |  | -       |   | $ | 556,783    |   |  | 22.7    |  
|NET INCOME (LOSS)                                    | $ | (4,697,449 | ) |  | (145.4  | ) | $ | (3,435,706 | ) |  | (140.1  | )
|Income (loss) per common share                       | $ | (0.07      | ) |  |         |   | $ | (0.07      | ) |  |         |  
|Total assets                                         | $ | 24,205,902 |   |  |         |   | $ | 1,024,768  |   |  |         |  
|Long-term liabilities                                | $ | 10,022,920 |   |  |         |   | $ | 141,766    |   |  |         |  

Revenue

In the nine months ended October
31, 2007, our revenues from continuing operations increased by $779,272 compared
to our nine-month revenue during the previous period ended October 31, 2006.
This increase was due to an increase of $818,484 in sales by our Carbiz Auto
Credit operating unit and a decrease of $39,211 in sales by our software and
consulting division during the nine months ended October 31, 2007 when compared
to the same period ended October 31, 2006. Carbiz Auto Credit generated sales of
$1,464,344, including $1,075,475 from our Company-owned locations and $388,869
from our joint venture location during the nine months ended October 31, 2007.
The increase in revenue from our Company-owned locations was the result of
additional sales at existing locations compared to the same period ended October
31, 2006, as well as one month of interest income associated with the loan
portfolio acquired on October 1, 2007. As the full sales operations of the 23
acquired locations are reflected in subsequent periods, sales revenue will
increase in accordance with the increase in volume of cars sold and interest
income for those locations.

Cost of Sales

Our cost of sales expense increased
  by $460,924 for the nine months ended October 31, 2007, compared to the same
  period ended October 31, 2006. Carbiz Auto Credit operations cost of sales increased
  by $395,844, including an increase in costs of $244,033 from our Company-owned
  locations and an increase of $151,810 from our joint venture location during
  the nine months ended October 31, 2007, and all other parts of the operation
  increased cost of sales by $65,080 during the six months ended October 31, 2007.
  The increase in cost of sales in our Company-owned locations was the result
  of additional sales at existing locations compared to the same period ended
  October 31, 2006 as well as one month of costs associated with the locations
  acquired on October 1, 2007, while the increase in cost of sales in our joint
  venture location was the direct result of additional sales compared to the same
  period

24

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ended October 31, 2006. As the full sales operations of the 23
acquired locations are reflected in subsequent periods, cost of sales will
increase in accordance with the increase in volume of cars sold and car lot
staffing levels for those locations.

Gain on debt forgiveness

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

Expenses

For the nine months ended October
31, 2007, our operating expenses increased by $1,749,468 compared to the same
period ended October 31, 2006. The Carbiz Auto Credit operating expenses
increased by $653,819, including an increase of $631,712 from our Company-owned
locations and an increase of $22,107 from our joint venture location during the
nine months ended October 31, 2007, while operating expenses for other segments
increased by $1,100,461 during the nine months ended October 31, 2007. While
overall operating expenses increased primarily due to currency exchange expense
and legal expense, personnel expense and selling expense increased by a total of
$166,135 as a result of increased advertising and additional staff needed at our
corporate locations to support the 23 additional acquired locations.

While depreciation and
amortization expenses decreased by $4,812 for the nine months ended October 31,
2007 as compared to the same period ended October 31, 2006, depreciation and
amortization expenses will increase in future periods as a result of fixed
assets acquired as part of the October 1, 2007 acquisition.

Interest Expense

Our interest and other expenses
increased by $654,665 for the nine months ended October 31, 2007, compared to
the same period ended October 31, 2006, as a result of the closing of the four
convertible debentures and both the original and amended line of credit. The
convertible debenture financings incur interest expense and the write off of
deferred financing costs. The current line of credit balance reflects the total
borrowed against the acquired loan portfolio. We anticipate our interest expense
will increase over this and subsequent years related to the Trafalgar Debentures
and as we draw down on our credit facility with SWC.

Gain/Loss on Derivative Instruments

For the nine months ended October
31, 2007, we incurred a non-cash loss of $1,408,092 as a result of the fair
value adjustment of outstanding derivative instruments and day one derivative
losses on new financings. During the 2006 period, the Company incurred non-cash
expenses of $2,817,530, the majority being $2,509,602 of warrant liability for
warrants issued in conjunction with the September, 2006 private placement and
the October, 2006 conversion of previously issued convertible debentures.

Software Sales, Support and Consulting

This segment of our business
consists of new sales and recurring monthly revenue for software products and
consulting products, and other related products including revenue from credit
bureau fees, supply sales, and forms programming. Our total software, consulting
and other sales during the nine months ended October 31, 2007 decreased by
$39,211 over the prior period ended October 31, 2006.

Due to the announcement that
effective at the end of the 2006 calendar year, we would no longer support one
of our DOS-based programs, all users of that program committed to the change to
our current product, and all of those installations were completed prior to July
31, 2007. We believe that our existing user base is remaining stable while new,
incremental software sales should continue to add customers for consulting
services. We believe the overall trend also indicates continuing growth of
recurring revenue.

Software sales provide
opportunities for us to introduce our consulting services to business clients.
While our software products facilitate data accumulation and reporting, our
consulting services help to interpret the data and provide advice, as well as
industry benchmarks, to help dealers improve results. Our consulting focuses on
implementing a data tracking product that automates some data analysis, creates
a recurring revenue stream and facilitates additional consulting services.

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

Carbiz Auto Credit

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

On October 1, 2007 we acquired
substantiall all the assets of Calcars, the fourth largest chain of "buy-here
pay-here" auto dealerships in the country. Before the acquisition, our CarBiz
Auto Credit division had established three buy-here pay-here dealerships in
Florida - all in the Tampa Bay region.

The purchase included a regional
office and 26 retail facilities in seven states. Three of the acquired stores
have been consolidated into nearby stores. The remaining 23 dealerships are
located in Illinois, Indiana, Iowa, Kentucky, Nebraska, Ohio and Oklahoma. It
also included a portfolio of consumer loans in excess of $27 million and fixed
assets valued in excess of $500,000.

The increase in sales activity
during the nine months ended October 31, 2007 was the result of an increase in
inventory levels at our three existing locations due to a increase in cash
available for the purchase of inventory after the closing and funding of the
August and September Trafalgar Debenture and the credit facility under the
Amended Credit Agreement with SWC as well as the interest income generated
during the final month of the period after the portfolio acquisition.

As of the period-ended October
31, 2007, the total Carbiz Auto Credit loan portfolio was $22,292,432. The
allowance for doubtful accounts at the same date was $4,414,002. The allowance
for doubtful accounts for the acquired portfolio was established as a reserve at
the time of the purchase while the allowance for the new portion of the
portfolio is established through the allocation of 100% of any repossessions in
process plus 8% of the remaining portfolio balance. All loans are made at a
maximum interest rate of 29.9% APR, with no loans made without complete
documentation and verification of employment and references. While our
underwriting procedures do not take credit score into account, a credit bureau
report is done on each customer. While the range of scores varies widely, the
average credit score of our customers is approximately 500.

Liquidity and Capital Resources

As of January 31, 2007 and
October 31, 2007, we had $67,990 and $2,472,019, respectively, in cash and cash
equivalents. During the nine months ended October 31, 2007, we increased our
accounts payable and accrued liabilities by $165,262, which totaled $1,397,872
at October 31, 2007. During the nine months ended October 31, 2007, we made debt
repayments and capital lease payments totaling $451,669, which includes $215,990
paid to retire long term debt and $230,000 to retire short term debt to a
related party.

On February 28, 2007, we sold an
aggregate of $2,500,000 secured convertible debentures to an investor, of which
we have received $2,098,964 of net proceeds after deduction of fees and expenses
as of the date of this report.

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

On August 31, 2007, we sold
$1,000,000 secured convertible debentures to an investor, of which we have
received $854,831 of net proceeds after deduction of fees and expenses as of the
date of this report.

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On September 26, 2007, we sold
$1,500,000 secured convertible debentures to an investor, of which we have
received $1,244,832 of net proceeds after deduction of fees and expenses as of
the date of this report.

On October 1, 2007, we sold an
aggregate of $800,000 secured convertible debentures to a group of investors,
some of which are related parties, of which we have received $800,000 of gross
proceeds as of the date of this report.

On October 1, 2007, we entered
into an amended credit facility with SWC Services LLC, as initial lender and
administrative agent, the other lenders who become a party to the Amended Credit
Agreement from time to time and AGM, LLC as Additional Collateral Agent. SWC
Services LLC is an affiliate of the Companys former senior lender, Colossus
Capital Fund, L.P.

The Amended Credit Agreement has
a maximum commitment of $30 million, including a $23 million revolving
receivable loan facility, of which $310,597 was borrowed at October 31, 2007, a
$2 million revolving floor plan loan facility, of which $350,000 was borrowed at
October 31, 2007, and a term loan in the amount of up to $21.925 million, of
which $19,574,623 was borrowed at October 31, 2007. The revolving receivable
loan facility and revolving floor plan loan facility will expire on October 1,
2011, and the term loan has a maturity date of April 1, 2011.

We used proceeds from the
borrowings primarily to finance our operating loss, expand our Carbiz Auto
Credit operations and fund the acquisition of the assets purchased from
Calcars.

As of October 31, 2007, payments
due by us over the next five fiscal years for operating and capital leases, and
long-term debt are as follows:

|                       |   | Less Than  |  |   | One to Three |  |   | Three to   |  |   | Greater than |  |   |            | 
|---------------------- | - | ---------- |  | - | ------------ |  | - | ---------- |  | - | ------------ |  | - | ---------- | 
|                       |   | One Year   |  |   | Years        |  |   | Five Years |  |   | Five Years   |  |   | Total      | 
|Operating Leases       | $ | 1,143,052  |  | $ | 909,537      |  | $ | 38,520     |  | $ | -            |  | $ | 2,091,109  | 
|Capital Leases         |   | 8,217      |  |   | 4,490        |  |   | -          |  |   | -            |  |   | 12,707     | 
|Long-Term Debt         |   | 10,638,611 |  |   | 9,596,609    |  |   | -          |  |   | -            |  |   | 20,235,220 | 
|Convertible Debentures |   | 2,039,550  |  |   | 2,996,006    |  |   | 764,444    |  |   |              |  |   | 5,800,000  | 
|Interest (1)           |   | 542,766    |  |   | 332,674      |  |   | -          |  |   | -            |  |   | 875,440    | 
|                       | $ | 14,372,196 |  | $ | 13,839,316   |  | $ | 802,964    |  | $ | -            |  | $ | 29,014,476 | 

|(1) | Does not include our credit facility with SWC that has a
      maximum commitment of $30 million and expires on September 30, 2011. At
      October 31, 2007, we had total outstanding borrowings under the credit
      facility of $19,885,220.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on nine month results and
an assumption of meeting business projections for the remainder of the fiscal
year, our current cash flow from operations and our cash on hand are expected to
be sufficient to fund our operations until January 2009. Actual results that
vary from projections may require the need for additional cash during that
period. Our ability to arrange such financing in the future will depend in part
upon the prevailing capital market conditions as well as our business
performance. There can be no assurance that we will be successful in our efforts
to arrange additional financing, if needed, on terms satisfactory to us or at
all. The failure to obtain adequate financing could result in a substantial
curtailment of our operations. If additional financing is raised by the issuance
of securities, control of Carbiz may change and/or our shareholders may suffer
significant dilution.

Off-Balance Sheet Arrangements

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

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Item 3. Controls and Procedures

Disclosure Controls

Under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of the end of the period covered by this report (the Evaluation
Date). Based upon that evaluation, the Chief Executive Officer and Chief
Financial officer concluded that, as of the Evaluation Date, our disclosure
controls and procedures were operating effectively to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act, is recorded, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission, and
accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial officer, to allow timely decisions regarding
required disclosures.

Internal Control Over Financial Reporting

Our management is responsible for
establishing and maintaining adequate internal control over financial reporting
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. No changes in our internal
control over financial reporting occurred in our existing operations during our
most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting. As
previously mentioned, we acquired the Calcars operations on October 1, 2007 and
we immediately began to transition the Calcars operations to the Carbiz suite of
business solutions which includes dealer software products focused on the
buy-here- pay-here markets. Carbiz is also implementing changes to Calcars
operating and internal controls with a goal of public company internal control
standards.

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

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PART II  OTHER INFORMATION

Item 1. Legal Proceedings

None.

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

None

Item 3. Defaults Upon Senior Securities

None.

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

None

Item 5. Other Information

None.

Item 6. Exhibits

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

|Exhibit |                                                                                  
|------- | ---------------------------------------------------------------------------------
|Number  | Description                                                                      
|31.1    | Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a)        
|31.2    | Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a)        
|32.1    | Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
|32.2    | Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

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SIGNATURES

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

|                        | CARBIZ INC.
|----------------------- | -----------
|                        |            
|Date: December 17, 2007 | By:        
|                        |            
|                        |            
|                        |            
|                        |            

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