Welcome to success tips.
Today there is an abundance of amazing technology that can assist managers and dealers to appraise vehicles more surgically - vAuto, CARFAX® Vehicle Valuation Reports, TradeRev®, EBlock and others. These incredible tools and technologies are designed to provide various forms of market data and analysis and even the ability to sell a potential trade-in during the appraisal process.
However, the technology was never meant to replace the physical appraisal and valuation of a vehicle by an experienced manager or dealer. The technology was meant to enhance it and provide additional tools and data.
A concerning trend in many dealerships is the over reliance of technology tools to appraise vehicles to a point where there are managers and dealers that no longer physically examine or drive the vehicles being appraised.
An excellent appraisal process consists of 3 components.
1 - The completion of the UCDA appraisal or software form and a fully completed and signed customer disclosure statement.
2 - A physical examination and road test of the vehicle by a trained appraiser
3 - Research utilizing technology (if available)
However, I would like to focus on the valuation of the vehicle before the use of any technology tools. When (as an appraiser) you complete the first 2 steps of the appraisal process, establish a value on a vehicle before utilizing any technology tools.
Ask yourself the question, “What could we sell this vehicle for in our market?”. Play this mental game on every appraisal. If, for example, it was your expert opinion that you could sell the appraised vehicle for $19,900, then that’s where the number begins. The second question is, “How much will it cost to recondition this vehicle?”. Cost of reconditioning varies greatly depending on your business model, however, if during your physical examination and road test of the vehicle you estimated that the cost of reconditioning would be $1,000, subtract that number from the $19,900. The third question is, “How much gross profit do we want to make on this vehicle?”. Again, that decision will have a number of variables, however, if you decided that you wanted a $2,000 gross profit margin subtract that number also.
So, start with the $19,900, subtract the $1,000 reconditioning cost
and then subtract the $2,000 gross profit margin and you are left with $16,900 which represents the appraised value. Once you have established your own appraised value based on your physical examination and road test of the vehicle - and your market experience, then begin your research utilizing the technology tools that are at your disposal.
By challenging yourself to establish a mental valuation for every trade-in, it forces you to continuously look at vehicle values - whether that be Adesa auction results or retail numbers from consumer websites such as Carpages, Autotrader, CarGurus or Facebook Marketplace. It also has you absorb and remember previous appraisals. If you are solely relying on technology tools, there is really no need to research and stay in tune with the market.
So why not simply use the technology only? After all, you’re paying for this market intelligence. Here’s why; the technology is not always going to be able to provide bullet-proof, accurate valuations on every vehicle. There are too many nuances and pivots in the marketplace. Technology can provide excellent guidelines, but even the technology providers suggest that it is meant to provide current market information and guidelines and (in many cases) to confirm or challenge the thinking of the appraiser. By relying on the technology only, it can also quickly erode the rest of your appraisal process; appraisal forms and customer disclosure statements are often incomplete and physical examinations and road tests start to diminish. By going through the mental exercise of establishing a market valuation on every appraisal it keeps you mentally alert and highly in tune with your marketplace. It also provides you with a comparison; your mental valuation versus the technology’s valuation. Many skilled appraisers enjoy challenging themselves in having the two numbers aligned.
It’s important that a professional appraiser (whether that be a manager or dealer) be viewed by both the customer and sales team as the expert. This instills confidence when Sales Consultants introduce a trade-in value and when customers receive them. Appraisers need to understand their market by continuously researching vehicle values, market trends and by establishing mental valuations on vehicles. Don’t let technology make you a lazy appraiser.
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Thank you for watching. I’m Chris Schulthies
