A universal truth in our industry is that there is no way for a single car dealer to be an expert appraiser for every single car they process. It’s easy to understand why.
Over the past five years, over 11,000 different make, model, and trim combinations were manufactured. When you include color variations, this number skyrockets.
Regional market variances make determining a trade-in value even trickier. For example, a 2WD 2017 Ford Explorer isn’t going to bring the money in Boston, Massachusetts that it would in Atlanta, Georgia - especially in mid-January.
It’s not that dealers are short on tools to assist them with the process. At any given time, they have data such as car value by VIN from a wide range of valuation guides, auction information, and vehicle history reports.
While these tools prove somewhat useful, they leave a lot to be desired when it comes to bridging the gap between an estimated trade-in value range and an actual guaranteed offer.
Packing on more dashboards isn’t the solution. Expanding your wholesale network helps, but only in some cases. It’s clear that a better methodology is required in order to create real improvement in used car operations.
A new and emerging approach to appraisals - the community approach - is transforming the auto industry by infusing the process with transparency, connectivity, and a much deeper level of accuracy than ever before. Below, we highlight some of its most interesting characteristics.
Trade-in Value and Human Interaction
The single most important differentiator of the community approach is the human element. The expert appraisers who comprise the community understand the unique characteristics of local markets and the demand for specific vehicles within them.
Professional appraisers have deep expertise across a broad spectrum of vehicles and brands. This is especially important when you consider the fact that over 60% of the trades a dealer processes each year are non-core/off-brand units.
Studies show that the chance of getting buried in a car, even when relying on car value by VIN services, increases exponentially when a car is unfamiliar to the dealer. Collaboration with live appraisers who are solely dedicated to evaluating cars greatly improves the process.
Much like social media, the community approach to trade-in value is built on technology that connects people in real time - often by way of mobile apps. In the midst of a busy work day, sales professionals are making retail deals involving live trades and the risk of valuation mistakes is high.
Guaranteed offers from knowledgeable appraisers bring a level of confidence to retail deals that has never been possible before. Tools like The Appraisal Lane improve operations by generating offers on live trades in 15 minutes or less, and can also be applied to aged units that haven’t moved in 30, 60, 90 days or more.
Beyond Trade-in Value
In addition to connecting dealers with appraisers, the community approach can connect dealers with a national network of wholesale buyers who are actively seeking in-demand used inventory. This creates a reliable disposition channel, where any unit - live trade or aged - can be exchanged at market value with the push of a button.
Dealers using the community approach have access to a pool of inventory that includes the stock of other dealers in and outside of their local markets. They can bid on live trades that are being processed at other dealerships in real time. And they can bid on privately owned cars that are still on the consumers driveway.
A vehicle that presents a disposition problem for one dealer might be in high demand for other community members, creating a shared value opportunity with lower acquisition and disposition costs for all parties.
Tools that generate car values by VIN using average value ranges are risky by comparison. The community approach positions the wholesale industry for marked improvements in dealership operations - improvements that have been a long time coming.