Used car value averages have a long history in the auto industry. They play a big role in the customer experience for buyers with trade-ins. And they are a major factor in your overall net profit on wholesale inventory.
Is it smart to rely entirely on averages when these critical success factors are on the line?
Old habits die hard. When we look at auction reports and market reports, we automatically start trying to find an average value to assign to the car in question. But this approach can lead to some serious mistakes.
And those mistakes can have a big impact on your customer experience. Let’s take a look at 3 important examples.
#3 - Overlooking the Individual Characteristics of a Trade
Used car value averages take many factors into consideration. But they do not consider the unique characteristics of an individual vehicle. They don’t evaluate a vehicle based on its own true merit.
Averages and book values give us a range, but two seemingly similar cars might fall on opposite ends of that spectrum. Simple factors like color combination can have a major impact on value depending on the region where the vehicle is being sold.
If you give your customer a trade-in offer based on an average, while your competition gives them access to a collaborative appraisal process that takes into consideration their vehicle’s unique history and characteristics - your customer experience suffers as a result.
#2 - Used Car Value Averages Create Risk with Off-Brand Inventory
When a vehicle falls outside your normal stocking plan, this is when used car value averages present the greatest risk. This situation can lead unsuspecting buyers straight into a negative customer experience with your dealership.
Generally speaking, dealers are comfortable placing a value on vehicles they are familiar with. But when an oddball unit rolls on to the lot, everyone knows the risk of getting buried in that trade goes up immediately. And that risk is reflected in the offer your customer sees.
Community-based tools like distributed auctions give you access to real people who are familiar with that make and model. If the car’s unique service history or options packages have a significant impact on its value - they’ll know it.
#1 - Many Averages Ignore Market Factors
Regional markets present nuances that are frequently overlooked by used car value averages. Averages don’t consider what the market will bear - they have no idea what someone in your area will pay for a given vehicle on a given day.
Community-based tools like The Appraisal Lane give dealers a real-time look into the wholesale market to know exactly what another dealer would be willing to pay for that exact car. In many cases, you can get a guaranteed offer for the trade in before you ink the retail deal.
In this case, the difference between a good customer experience and a bad one is the presence of real people - human intelligence.
Improve Your Customer Experience by Eliminating Mistakes
Book values and averages simply aren’t the best tools to manage the front end of your inventory cycle. Relying on them too heavily leaves you open to mistakes that impact your bottom line and your customer experience.
Today’s new technologies like distributed auctions allow real-time collaboration that eliminates the risk in most of the situations discussed above. These tools can protect your cash flow, insulate you from valuation mistakes, and greatly improve the customer experience your dealership provides.