Three Keys to Transparency in Used Car Valuation

October 27, 2019 in Trade-In Tips

There are several best practices in used car operations that can help make your sales force a success. From car valuation methodology to development and staffing, each rule relies on the others for optimal performance. 

Here at The Appraisal Lane, we believe the most important of these best practices is transparency. Objective, unbiased information and clear communication between you and your customers, as well as internally across departments and between team members. 

In spite of its importance, there is a pervasive lack of transparency in our industry. 

When new cars are sold, they are accompanied by a wealth of OEM data. Specs such as equipment details, crash test ratings, fuel economy, performance data, and MSRP are readily available. Used cars, however, are quite the opposite. 

The information issued with new cars is often lost when those cars changes hands, making it hard to accurately identify specs and assess accurate car prices. 

Considering that over 11,000 make/model/trim combinations were manufactured in the past five years alone, it’s virtually impossible for dealers to know the details of every trade they process. Car valuation can be extremely difficult – particularly when it comes to brands outside a dealer’s core inventory.

When you factor in variables such as physical and mechanical condition, VHR data, make ready and remarketing costs, and local market conditions - it’s easy to see why valuation mistakes are commonplace, and why dealers and consumers are at odds over trade-in values. 

How does transparency fit into this mix, and why does it matter? Following are three key steps you can take to leverage transparency to improve your business. 

1) Create a Network of Car Valuation Resources

In addition to car valuation guide data, create a network of valuation resources you can rely on to assist with trade-in appraisals, particularly for units outside your core product line. 

If you’re an enterprise operation, lean on sister stores for collaboration and input regarding used car prices. The more connected you are with expert resources who understand the nuances of vehicles across all brands, the better. 

2) Involve Your Customers In the Appraisal Process

When it comes to your customers, communication and education are key to creating a great appraisal experience. 

Sometimes a simple explanation such as the fact that their vehicle doesn’t meet your stocking plan, or the specific costs associated with parts, repairs, or auction transport, can go a long way in helping customers understand your car valuation process. 

Don’t forget to ask questions about their vehicle, such as prior paint or bodywork, known mechanical issues, or routine service and maintenance. You might be surprised at the level of detail customers will provide when you invite them to take part in the process. 

Not only will the additional information help you better assess the vehicle, but the open dialogue will further engage your customer and help to develop a trusting relationship. 

3) Promote Transparency and Consistency Within your Dealership

A standardized process for used car valuation empowers your staff and allows you to track and optimize your efficiency and effectiveness. Find the process that works best for your team and stick with it, every time. 

Hold regular cross-department meetings to communicate shared goals and objectives around car prices and valuation. Continuously review and value your inventory, particularly after reconditioning, and be sure trades are regularly reviewed between your GM and UCM. 

The most successful dealerships understand that transparency doesn’t begin and end at the curb. This same willingness of communication, education, and information sharing should be present across all departments to improve your business, optimize your car valuation approach, and enhance customer satisfaction in the process.