Historically, dealers have offered practically no transparency for consumers during the vehicle trade-in process. But the internet has changed the way people shop and make decisions. Nowadays, transparency with consumers during the vehicle trade and appraisal process is critical.
One common resource that consumers have today are third-party evaluation sites such as KBB.com and the likes. These online evaluators offer an information exchange that gives consumers an idea of what their vehicle might be worth. This information is then used by consumers to force some level of transparency from dealers.
It goes without saying that consumers want the most they can get for their vehicle. But there is more to a vehicle trade or sale than just the price. Other value factors come into play as well, which we address later in this post.
These value propositions can be used in response to the consumer’s “hope for gain” as one industry veteran puts it - Ed French from AutoProfit. Mr. French joined us recently on our monthly VAN University Best Practices and Training Webinar - a free educational program available in the VAN Learning Center.
During the webinar, French explained that consumers going to third-party evaluation sites are higher up in the funnel and that they are going there for one specific and obvious reason - to see what their vehicle could be worth.
“Dealers need to understand,” says French, “that the intention of a dealership should be to embrace what an evaluator assigns a vehicle, and create talk tracks around the idea that the vehicle could potentially be worth more, among other potential gains such ease of disposal, immediate cash, etc. All of those pieces,” he says, “create in the mind of a consumer - ‘Why would I not want to come see you?’
“Hope for gain” is an effective approach for dealers with any person trying to dispose of their car. By taking that mindset and not becoming defensive about the fact that they went to a third-party valuation tool, you will win way more times than you will lose.
They are going to be approximately 40 million used cars sold in the US in 2019. But did you know that more than 14 million of those transactions will between private parties? This means that car dealers missed will miss out on more that 30% of the used vehicle market this year.
Most of those cars, as Ed stated during the webinar, are midlife cars that every dealer would love to have because you won’t find many of them at auction. “And when you do,” French points out, “you’re bidding against a hundred other bidders.”
But when you're buying from private sellers, you are about the only bidder.
Appraisal effectiveness often referred to as “Look-to-Book,” is the ratio or percentage of the total number of appraisals to acquisition. But this rate, as Ed suggests, can be manipulated based upon appraisals that are closed and appraisals that may not have been entered into a pricing tool. So dealers need to be honest with themselves and their numbers.
“If you are south of 50% effectiveness in your acquisition department, then you’ve got work to do,” says French.
Regardless, Ed recommends appraising everyone's car, not just the ones you are looking to buy. “If I am appraising more cars, just as a percentage of capture rate,” he says, “I am bound to acquire more cars.”
Ed says you literally have to force your team into appraising more cars so you can acquire more cars.
So, what are some ways to improve your appraisal effectiveness? Two key takeaways from Ed that came up during the webinar are transparency, which we addressed initially, and speed.
“When time is the new currency for both dealers and consumers, you've got to make the fast part of this and the transparent part of this go together like a hand in glove,” French explains.
Fast, safe, and easy. These are your “hope to gain” hooks. These are the value propositions your talk tracks should be reinforcing. And remember, consumers don’t necessarily need the highest price for their trade. They just need to know the why behind the number. They don't want to know the value of the car in the wholesale or retail market, they just want to know what makes their vehicle worth more or less.
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The video featured in this post provides only a glimpse of the full webinar which was originally recorded in April 2019. For access to the complete webinar recording, and for exclusive access to future live webinars where you can interact with our panel of experts, sign up free in the VAN Learning Center.