By Frank Scott
Trade-in appraisals are a boon to both new- and used-vehicle sales and a great way to acquire core used-car inventory without paying auction and transportation fees. And all it takes is saying the following to every customer who drives onto your lot:
“Hey, I see you drove up in that Dodge Charger (or whatever). We’re looking for used cars. Do you mind if we do an appraisal?”
Some salespeople might shy away from making that statement because they feel it adds yet another layer to negotiations, but they shouldn’t. Here are four steps to help you craft a comprehensive appraisal strategy and trade-in mindset that will yield positive results at your dealership.
Make it part of your dealership’s culture to ask every sales and service customer whether you can appraise their vehicle. And make sure to record those interactions in your CRM. Additionally, make sure your customers accompany your appraisers as they inspect their vehicles. Here’s why:
The first question your appraisers need to answer is whether the vehicle they’re evaluating is a retail or wholesale piece. If it’s wholesale, get the car’s book value — Manheim Market Report, Black Book, or Kelly Blue Book — and add or subtract from that value based on the vehicle’s history, condition, and other things that affect its price.
If it’s a retail piece, the following to-do list can help calculate its appraisal value:
You’ve settled on an amount. Now you have to convince your customer it’s a reasonable price. Here’s what you need to show your customer:
There’s no guarantee your customers will agree with your appraisal, but they may be more understanding if you say something like: “We love your car, but we are in the business to make a little bit of money, and this is the best we can do on your car.” That statement may even get them to say, “Yeah, I do need tires; I see where you’re coming from.” The key is to justify your appraisal.
So you’ve improved your appraisal numbers, but are you winning enough appraisals? And what should your appraisal closing ratio be? Here are a couple of stats most dealerships monitor to get those answers:
With car sales expected to plunge during the COVID-19 pandemic, dealers undoubtedly can use all the help they can get. One major advantage of using Inventory+ to assist with appraisals is that its vehicle price data are based on real transaction data, not internet listings.
Remember, it’s dangerous to base your prices on just what the market listings are saying. That’s because some dealers could panic, drop their online price, and then send that car to auction. And you won’t know whether the price you see online represents a car sold at retail or one sent to auction. Following internet prices can be misleading and cause other dealers to panic as well, so don’t be part of the problem.
Frank Scott has been in the automotive industry for over 17 years and currently serves as a Senior Customer Success Manager at DealerSocket.
By Patrick Mendoza
I’m not going to sugarcoat this: The current situation is bad, and it’s going to get worse.
You’ve heard this a hundred times the past couple of weeks, but these truly are unprecedented times. I’ve never seen such a drop in both the stock market and consumer purchasing, and such a rise in unemployment and concern.
The fall due to the pandemic all happened very quickly. Just one month ago, the stock market was at record levels, and analysts were predicting new auto sales to remain around the 17 million mark as it has been for the past several years.
Now, dealerships are closed due to government mandates and have had to furlough large swaths of their sales teams. Sales have fallen off a cliff, and now JP Morgan Chase is predicting auto sales to only reach 10.3 million units this year…10.3 million.
That’s bad. But you know what, this won’t last forever.
In all great moments of history when everything seemed bleak and that the bad times would never end, they did. The title of this post is “Hard Times Come Again No More,” which is the name of a sad song the soldiers used to march to in the Civil War. Think about how bad everything seemed then: brother vs. brother, the United States ripped apart with no hope of reconciliation. But guess what, we did, and we were stronger than ever.
It’s dark now, and, as King George VI said on the eve of World War II, “There may be dark days ahead,” but the industry will be back, and I think it will be back quickly.
Before long, customers will be back. Showrooms will turn their lights on again, and sales will rise.
The question is, will you be ready?
The downtime is your time to make sure you have everything in place for when the good times return. Do you have all of your customers and prospects in your CRM? Are you using a useful data mining tool to help you attract your customers back to your store? After all, it’s cheaper to retain an existing customer than attract a new one. What about your inventory? Are you stocking the most profitable vehicles for your lot?
Now, more than ever, it is your opportunity to be ready for when the people come back.
If you haven’t, or if you’re not sure, operators are standing by. It never hurts to call us and see if you’re ready. We’d love to help you.
Patrick Mendoza serves as director of corp. communications for DealerSocket, Inc. Email him at [email protected].
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By Gregory Arroyo
Remember the period between late 2007 and 2009, when the housing crash that caused the credit crisis led to the Great Recession? The market was tough to read, and the used-car guides were all over the map.
Dealers that bulked up on big trucks and SUVs were stuck with a lot full of them, as gas prices reached $4 a gallon and finance sources tightened up. Any car buyer with below-prime credit couldn’t get approved, as banks weren’t sure where car buyers — particularly those with investment properties — would land and finance companies were dead in the water.
The good news right now is we’re not experiencing any of those market dynamics. But news surrounding COVID-19 (a.k.a. the Coronavirus) has certainly heated up in recent days.
Hearing about Tom Hanks was disconcerting. So was hearing about the National Basketball Association’s decision to suspend the season, after Utah Jazz center Rudy Gobert became the first major professional athlete to test positive for the virus. Now his teammate, star Donovan Mitchell, has tested positive.
As of March 10, there have been at least 116,000 coronavirus cases worldwide. About 64,000 people have recovered, and 4,000 have died. Here in the United States, multiple states are under a state of emergency.
With all that said, the one thing I love about this business is how opposed it is to doom-and-gloom talk. In fact, just yesterday, the founder of a car dealer Facebook group I belong to urged all admins not to allow panic to take over the group.
“I don’t want negative talk about this affecting us,” he wrote.
It made me think of this great line from the first Avengers movie: “Until such time as the world ends, we will act as though it intends to spin on.”
Hey, consumers who need a new car (or used) today will still need it tomorrow. Still, it’s not business as usual, so preparation is vital.
So, if you’ve loaded up with inventory the past couple of months to take advantage of tax season, monitoring aging will be key. And if you’re part of a group that engages in group trading, it’s time to dig into your inventory management systems to ensure vehicles are on the right lots. It’s not time to panic, but you should have exit plans in place.
I recall a story told to me back in 2009. A dealer in the Northeast took on a bulk of pickups in trades just before things got bad. Having dumped $5,000 to $7,000 into the vehicles, he refused to take a loss at auction when things did — even though he was losing money each day those vehicles sat on his lot. His patience was rewarded, however, as he ended up grossing $2,000 to $5,000 by waiting out the storm for a couple of months. Americans do love their trucks and SUVs.
You also need to fire up that CRM. Hey, you know you have customers reaching the end of their finance, lease, or warranty term. Vehicles also need to be serviced. Maybe it’s an excellent time to offer free service pickup and return.
And if you’re a dealer that dipped your toe in the digital retail waters — or maybe offer test-drive deliveries — today’s uncertainty represents an opportunity to really test those strategies.
So, start promoting those customer conveniences, and make sure your digital retail button stands out. In other words, remove any conflicting calls to action on your vehicle details and dedicated landing pages. Banner promotions on your search results pages and VDPs are a must.
Now, when it comes to your employees, I suggest not sticking your head in the sand. Management teams need to get educated on this virus, and communication will be critical. Care also needs to be taken when it comes to the cleanliness of your showroom, employee offices, and common areas.
With all that said, here’s what I do know in all this uncertainty: Every time this business faces a severe hardship, it always seems to come out the other side a better industry. I’m sure that will be the case once again.
Gregory Arroyo is the former editor of “F&I and Showroom” and “Auto Dealer Today” magazines. He now serves as senior manager of strategic content for DealerSocket. Email him at [email protected].
Learn more about DealerSocket's products and schedule a demo with a representative.
Learn more about DealerSocket's products and schedule a demo with a representative.
Learn more about DealerSocket's products and schedule a demo with a representative.
Learn more about DealerSocket's products and schedule a demo with a representative.
By Gregory Arroyo
Remember when the prevailing wisdom when it came to your dealership’s interactions on social media was to treat it like a cocktail party? Join the conversation and don’t sell, they said. Dealers haven’t lived by that standard for years, and now Facebook wants to make it even easier for you to market your inventory and post-purchase services.
In fact, the social media giant believes its family of apps can act as an extension of your CRM and turn car buyers into customers for life. Brent Parres, partner manager for Facebook’s automotive vertical, talked about Facebook’s new play during a recent webinar in which three new integrations with DealerSocket were revealed. He also shared the following stats to prove the platform is worth your attention and a bigger slice of your marketing budget:
The timing of Facebook’s push is interesting. Currently, approximately 34 states are considering changes to their privacy laws. Speaking at the Vehicle Finance Conference this past February, Mark Templin, president and CEO of Toyota Financial Services, said there is a real possibility the industry could be looking at “51 different standards” when it comes to protecting consumer data.
As I noted back in January, data remains our industry’s best opportunity as well as its greatest threat. Facebook knows all too well what I mean.
Remember all the scrutiny Facebook came under after the exposure of the Cambridge Analytica data scandal in March 2018. Well, it forced two significant shifts in how the social media giant manages its platform:
Shift No. 1: Facebook now views its family of apps as a single, privacy-focused messaging and social networking platform. For users, that means easily and securely communicating across Facebook, Messenger, Instagram, and WhatsApp. For dealer marketers, that means you can use the same budget to target car buyers across Facebook’s platform.
Shift No. 2: Facebook no longer allows marketers to use natively integrated data from third-party firms like Nielsen Data and Polk for custom audience targeting. That doesn’t mean you can’t take advantage of third-party data targeting outside of Facebook. The social network simply wants dealers to rely on their data (whether scrubbed by a third party or not) when operating on its platform, which brings me to the first of three key integrations between Facebook and DealerSocket:
Integration No. 1: Facebook Audience Integration with DealerSocket’s CRM
The new connection, a pilot of which was recently completed, will allow Facebook campaigns to sync with customer lists inside DealerSocket’s CRM. Parres said that translates into limitless audience segmentation. Think about what that means in terms of your operation’s post-purchase, customer-for-life efforts.
“Those systems will match data back and forth and update back and forth, so you don’t have to constantly update your audience lists,” Parres explained. “The fact that DealerSocket is going to set this up for you and refresh the data automatically … You can’t get any better than first-party data.”
Integration No. 2: Automotive Inventory Ads
DealerSocket will soon roll out an inventory export that automatically uploads a dealer’s entire inventory to Facebook to populate the social network’s Automotive Inventory Ads. Facebook serves up these ads based on availability, pricing, and intent. That means consumers looking for Volkswagen are shown models with the body styles that mean the most to them.
“It’s our best-performing product when trying to drive leads or sales on a specific piece of inventory, so this integration would put you at a unique advantage,” Parres said of the integration, which will be available to users of DealerSocket’s CRM, Inventory+, and DealerFire websites. The connection also means no more switching out creative, because the creative is the inventory out on the lot.
Integration No. 3: Facebook Direct Lead Post
Facebook Lead Ads, which take advantage of the social network’s audience selection and optimization products, allow dealers to customize lead forms that auto-populate based on a Facebook user’s profile data. Soon, through a new integration, the information collected from those lead ads will automatically post into DealerSocket’s CRM so the sales team can take immediate action.
“We know the longer a lead sits, the worst the potential outcome will be,” Parres said. “So, this would be a huge convenience for [dealers].”
What’s also interesting about Facebook’s timing is many dealers are reconsidering their investments in third-party lead sites. Maybe a little competition is what’s needed.
Gregory Arroyo is the former editor of “F&I and Showroom” and “Auto Dealer Today” magazines. He now serves as senior manager of strategic content for DealerSocket. Email him at [email protected].
It takes skill, technology, and a keen eye focused on sales and prices at your dealership and in your market to yield desired profit margins when pricing pre-owned inventory, say Winston Harrell and Nick Oakley.
As two dealership veterans who now serve as strategic-growth managers for inventory at DealerSocket, they combine their expertise to present strategies, practices, and tips to help calculate prices for your online inventory that will attract eyeballs and foot traffic to meet your dealership’s sales and profit goals.
Have a pricing strategy at the point of acquisition; in other words, know how a vehicle fits into your dealership’s marketing plan and your market, and know the vehicle’s best price, Harrell says.
That means vehicles of a similar make and model should be further categorized and priced to compete based on attributes such as trim level, optional equipment, or whether it’s certified, Oakley says.
Still, shoppers are going to look for price first, Harrell adds. So having some attention-grabbing product with less content and a lower price that also fits the dealership’s business model “is always a very good strategy to have,” he says.
Know your dealership’s marketing radius and your nearest competitors. For example, dealerships in rural areas might have customers who are willing to drive three hours to buy a car, but consumers in major metropolitan areas won’t travel more than 30 minutes to a dealership.
Know what you can sell and when you can sell it for the most profit. If you lack historical pricing and sales information in your inventory tool, you’d have to do it yourself by extracting data from your dealership management system, “and it’s not really set up for that,” Harrell says.
Inventory+ offers a pricing report that can help, filtering sales by make, model, age, and more. It also serves up historical data such as:
“So I have those factors I need to make an intelligent decision,” Harrell says.
Some dealerships engage in aged pricing — also known as turn pricing — meaning that an unsold vehicle’s price is reduced at set intervals as it ages.
When Reedman-Toll Auto Group expanded to 10 dealerships across suburban Philadelphia, they knew they had to integrate used car operations across the group, ensuring each unit found got to the location with the best chance to maximize profit.
To accomplish this, Moshe Schoopachevich, Director of Used Car Operations for Reedman-Toll, needed to overcome two specific challenges many groups face.
Communication between dealerships is the first hurdle any manager faces when working to make 10 rooftops function as one used-car operation. Vehicles often sat at one Reedman-Toll dealership, losing value for months when it could have been sold by another dealership in the group.
Another issue, Schoopachevich said, was that his Used Car Managers relied too heavily on instinct and habits. Certain dealerships had units on their lot, losing value for an entire year because managers believed they would eventually sell, when data and improved line of sight would have shown them another rooftop within the group was far better positioned to move the unit, faster and at greater profit.
Schoopachevich knew implementing an inventory management strategy across the entire group would require less reliance on individual instincts and more adherence to specific, data-informed strategies. And getting there would require a new tool and improved process.
Today, the average selling time for a vehicle at Reedman-Toll is 25 days. And Reedman-Toll’s flagship store in Langhorne, Pennsylvania consistently sells around 300 used vehicles a month, up from 185 when the group expanded to 10 rooftops in 2014.
But it’s taken a true team effort to get here.
In addition to harnessing the data made available by DealerSocket’s Inventory+, Schoopachevich credits the broader view of each store’s processes, many of which have been informed by input from DealerSocket’s Strategic Growth Manager, Darren Militscher.
As part of his role at DealerSocket, Militscher helped Reedman-Toll set up internal trade desks and regular internal auctions with ground rules about condition and pricing. The tools within Inventory+ allow every manager to see the “buy” list at other stores.
But access to information is only one part of the process, albeit a big one. Militscher is quick to point out how critical it is to a group’s success that individual stores are not forced to accept cars they perceive as unwanted by another within the group.
“Forcing stores to trade inventory doesn’t really work,” says DealerSocket’s Militscher. “When that happens, used-car managers can sometimes slow-walk vehicles and then say, You’re the one who gave me that car. I didn’t want it.”
Instead, each manager within the group needs to use the data to convince the other that a car has a clear opportunity to perform better at his or her store than its current location. The ability to show how working as a cohesive unit provides win-win scenarios across the group is key to getting universal buy-in.
Gone are the days when dealers have to take a loss (or series of losses over the course of a month) to learn their initial used vehicle appraisal was flawed.
Dedicated appraisers within a central appraisal group can monitor deals across an entire group in real time and provide insight to complex situations as they develop. They can then hyper-target vehicle pricing with the entire group in mind and eliminate mistakes at the individual dealership level.
Reedman-Toll employs three dedicated appraisers with the ability to dig into the data Inventory+ generates on similar vehicles from hundreds of miles around, while simultaneously looking back to prior months for the most precise result.
“There are probably 25 to 30 different Ram pickups,” says Schoopachevich. “One might be worth $25,000, but another, where everything looks almost the same is worth $35,000.” If an appraiser doesn’t know the details or local trends, that leaves a dangerous amount of room for error.
Of course, reliable data informs swaps between stores, but also prevents used-car operations from assuming that broader market trends apply in certain situations.
Schoopachevich has found success at Reedman-Toll by trusting data in a way that keeps him from riding a trend after it ceases being profitable. Data alerts, for instance, persuaded him to stock Cadillac ATS sedans in 2018, which turned out to be some of the group’s fastest turning and most profitable cars — selling, on average, in 13 days.
“This year, they disappeared,” Schoopachevich says, explaining that the ATS is no longer in the pricing sweet spot and won’t do as well.
In today’s car-buying world, Schoopachevich believes data tools are ultimately an extension of the internet, explaining that consumers are wise to prices of competing dealerships across a given region.
“They look at Kelly Blue Book and Edmunds, too,” he says, adding that data sourced from Inventory+ can tell dealers exactly where to price in a way that will hook those internet customers. Then, instead of haggling, Schoopachevich tells customers, “It's an Internet-based dealership. Our prices are very competitive. Is that the car you want to buy today?”
Additionally, DealerSocket’s Militscher is quick to point out Inventory+ prices do not represent the bottom of the market. They produce a snapshot of market conditions paired with a store’s history.
“The bottom of the market for a vehicle might be $12,000,” he says. “But if you’re selling them in 12 days at $13,900, you don’t need to be the cheapest.”