Trade Evaluation Process

Ron Henson
What is the process for evaluating trades at your store? * Who does the walk around with the customer? * What tools do you use to determine value and do you share those results with the customer? * Do you take the customer along on the evaluation drive? * Is the # you present to the customer a cash offer? * Do you UA the trade on the 1st pencil?
Chris Pyle
Great topic! Can't wait to see some ideas here. We try to buy as many cars at the door as possible and here's what we've come up with: 1. We offer a professional appraisal very early in the process so that the customers anxiety levels can drop. That being said, we don't just puke out a number right away, rather we offer to give them lots of information (price, payment, trade, lease finance etc) 2. We use Cardone's "Coach pads" to write up appraisals and the salespeople do the trade walk with the customer, then put everything in V-Auto. (they don't drive the customers car.) 3. The keys and coach pad are given to either myself, or one of the other managers to drive and determine the AVC while the customer is moving through the rest of the steps. We use Manheim, R-book, and all the other sources in V-auto to determine the value. 4. As part of the investment proposal, we use the KBB market value print out in V-Auto (the one that let's you show how much est. recon) a carfax print out (we type the trade value right on the carfax report and it looks awesome!) and any other third party data that backs up the number. We try to use an ACV (cash offer) and educate customers as much as possible, but sometimes it's an allowance based on the customers expectations. Cheaper cars (under $10,000) we hold back min $500. More Expensive cars we hold $1,000+ as a general rule. Salespeople don't know that however ; ) Our current look to book is around 60%.
Tom Banner
"we hold back min $500. More Expensive cars we hold $1,000+ as a general rule".This is why I send people to CarMax to get a buy it now price and leave the trade out of the deal when looking at new or used cars. They already know what their car is worth on paper. They can and do use it when they bring the trade in after satisfaction with the buy price. Then the dealer has to match CarMax on the trade or lose the sale. This is because dealers routinely offer $1000s less on the trade or "offer more than it's worth" by padding the new car's price. I implore my buyers to get the deal on the purchase side done. Then bring in the trade even if it's in the F&I office and be prepared to walk.I have never seen a dealer beat the ACV CarMax price on the trade in initially. It's worth driving a long way to get that buy number in writing. I have found the CarMax number to be good well after the 300 mile seven day statement. I had a customer with a Tacoma that was offered the same number six months later after putting on 1500 more miles. It also pays to walk the Carmax lot and see if they have too many of what is being sold. At the end of the day private sales are the best way to go becasue dealers HELP private sellers with their seemingly iron clad "Internet prices" which are ususally thousands above what someone can easily get for their car using AutoTrader CarGuru and Craigslist. Dealers help private sales with their high Internet pricing. There are thousands of dollars between wholesale. and retail a private seller can get. I personally have not traded a car in years since Internet pricing came out. I sold a Corvette for $34,950K Dealers were advertising at $39995K ACV value was $31500. I bought it privately for $33500. Needless to say my price for the same basic car out of warranty is far more attractive and comes up first in searches when buyers use the top dollar box
Chris Pyle
@ Tom, we have carmax right down the street and they're trade numbers are usually a joke. I wish everyone did what you suggest. In fact, Carmax buys all the junk at the auction we don't want because it's cheaper. They sell a ton of cars with a bad carfax guessed it...they don't use carfax (they use Autocheck) The only time carmax will pay up for a car is if it's not a good car. Then they are simply overpaying for junk, which to your point, in theory would cause us to do the same thing if we wanted the deal, not because it's a good business decision or the right price. If it's a good car (something we would retail here like a late model Lexus) our ACV will be $1000-$2,000 higher every time, meaning the $500-$1,000 we typically hold back for front end gross still allows us to give customers a very fair price for their trade, without them having to waste time putzing around at Carmax. Just last week, one of our customers took their 2013 IS250 convertible to carmax they wanted to sell outright before coming here. Carmax offered them $30,000 which the customer proudly displayed to us. We would have offered them $32,500 but thanks to their own streak of brilliance, they saved us $2,000 and the customer left happy with an extra $500 bucks in their pocket.
Chris Pyle
"At the end of the day private sales are the best way to go becasue dealers HELP private sellers with their seemingly iron clad "Internet prices" which are ususally thousands above what someone can easily get for their car using AutoTrader CarGuru and Craigslist"Ok...I was going to keep quiet, but I have to call bullsh*t. Most customers today value their piece of mind and their time. I for one, would never put my wife or my family in an as-is sled from some dudes front yard. I prefer knowing the vehicle has been through an extensive Factory backed inspection and reconditioning process performed by Factory trained Master techs. I also prefer having Factory backed new car level perks (like roadside, same brand loaners, pick-up and delivery etc) and new car ESC coverage and I prefer being able to borrow money on the cheap through Factory subvented APR programs. There's a reason Autotrader and default search setting isn't cheapest to most expensive. People want the best overall value for their money. Trying to save a couple bucks here and there by taking an as-is car to a local mechanic and buying some no name warranty, getting AAA, crossing your fingers and hoping for the best vs getting an aggressively priced CPO car from a reputable dealership with great financing terms and 100% piece of mind from start to finish... let's just say "The disappointment of poor quality lingers far longer than the euphoria of a lower price"
Tom Banner
Like a typical salesperson you place too much importance on "warranty issues" using fear. and care about the customers TIME? I don't think so. Customers are made to sit a long time for nothing while they are being grinded. (Your colorful language makes the deal "so dirty" "as is sled" in the "dudes driveway" .......That "sled" may have a couple years of new car warranty left, IF its a $7000 car it is better to buy privately as a dealer would be getting $9000+ for the same car "as is" after doing the very minimum to get it into shape. I would rather tell someone to offer $6K for a private deal and put $3k aside for any repairs AFTER the car is checked out by a mechanic, "As Is" is no different from a dealer than a private seller. I tell people to insure against catastrophe not inconvenience. Don't buy "peace of mind" Use the same money and be your own insurer. I don't advise people to buy them unless they are heavily discounted (as many are from out of state Sellers where a few dealers will sell them across state lines and $100 above cost. I know who will for which brands, and NEVER buy a third party ESC. NEVER Personally I don't buy them and know they are a huge money maker for the dealers and F&I people, I tell people to hold back $2500 and insure themselves. Then they have NO issues with "what is covered" or not. I know....... Fear sells. But most people don't have major issues where they would need an after market service contract. Private sales on low mileage late model cars still IN warranty are a much better deal than buying the same car for $3000 more on a lot and haggling for hours, then dealing with F&I. If I can find a private sale for someone I will send them that way. I shopped an 08 Corvette Z51 Convertible 3LT for this guy last July. Dealers wanted $42,000 asking for the same model with 11K miles. $38K for one with 37K miles. I found him a private sale with the same options from a one owner with 15K who was "asking" $38K and I got it for $33200 and a $300 flight one way. He saved at least $3000 over the dealers and can use that for any repairs or issues which are unlikely to add up to $3000 in another 12,000 miles he expects to put on the car in the next three years, He also received things dealers would hold back like two car covers, all the stock parts (The OO had the engine covers painted) and all the paperwork, photos, binder full of receipts and instructions for accessories he had purchased. The laminated build and Window Sticker Sheets from his purchase using the NCM Museum delivery, First of all you don't bring in the Carmax price until AFTER the dealer's initial ACV offer AFTER the buy price is agreed to. Not the funny money trade but actual cash value. I have taken at least seven deals to CarMax and in all cases they offered more than the dealer's initial "appraisal" A dealer can say "oh but we would have offered $XX,XX more but that is "pie in the sky" after the deal. Because they have an opportunity to do just that BEFORE the Carmax deal is brought out and IF they do offer more and it's ACV not funny money, the CarMax deal never comes into play. So you have your "grand opportunity" to offer more before you even see the Carmax deal!!! But you don't. and rarely do. If someone goes into a dealership waving the CarMax offer before negotiating on the buy side they lose the ability to get the "higher price" you mentioned you "would have offered" and that would be silly. ONLY bring the CarMax deal in 1. after you negotiated the price for the buy side 2. You are unhappy with the trade offer AFTER you negotiated the price on the buy side. Then the dealer has to put up or shut up or they loose the sale. I had a dealer tell me they would take me to Carmax to sell the vehicle then bring me back 90 miles away to buy a Honda Accord. I told them there was a Honda Dealer three blocks from Carmax and if we were going to have to sell at Carmax, we may as well go next door to the Honda dealer there as they can make the same deal. They stepped up and bought the trade for the Carmax price. At the time (2010) it was an 06 HHR they offer $6500 for. Carmax offer was $9000.Anyone but a car salesman will tell you private sales are a huge risk. They may be in sub prime cars, but so are the dealers of such cars. I will tell someone if they have $7000 to spend on a car, buy a private sale for $4000-$5000 instead, Have it checked out and put the extra $3000 aside (which may be the dealer profit ) as a hedge against issues. Buying a $7000 car at a subprime lot is worse than buying privately. Anyone can have a car checked out by a mechanic before they buy. Well worth the money. I see zero risk in buying an in warranty vehicle privately for $4000 less than a dealer. They can still buy an ESC if they want and get quotes from different dealers for it.Accidents can be hidden on new car lots as well as privately. Guy trades a Lexus and the Carfax is good. a month later the Carfax reveals an accident. Lexus Dealer was trying to sell the car "with a clean CarFax" I ran one just before the sale was done, and found the accident. We passed on the car. I am sure the dealer could tell the trde was in a wreck at trade time and offered far less. but since they had a clean Carfax they tried to sell it as such. Always run a Carfax if the dealer's Carfax is old.

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