As used vehicle margins tighten, the spotlight is squarely on appraisals. Getting the money right at this stage has never been more important—or possible thanks to the data-rich environment dealers now operate in.
Dealership leaders have long sought enhanced data to improve performance—particularly in the trade-in and appraisal process. Historically, tools like Look-to-Book and missed trade-in reports offered limited insight and peace of mind but rarely told the full story.
Fast forward to today, with deeper analytics and improved visibility, dealers and their partners can quickly spot breakdowns in the appraisal process and course-correct in real time. This is critical in a market were buying the right car, for the right money, can make or break your used vehicle strategy.
Flaws in Appraisal Process
A recent analysis of over 22 million vehicle appraisals from vAuto solutions revealed some telling patterns about where appraisal accuracy can fall short and how to close the gap. One key finding: 70% of appraised VINs underwent an average of four Actual Cash Value (ACV) changes over time. While some fluctuation is expected due to negotiations, reconditioning updates, and deal structuring, these changes raise questions about how accurate and consistent appraisal processes actually are.
A deeper dive into 100,000 of these vehicles showed that:
- 54% of the appraised vehicles/VINs used default or average reconditioning estimates.
- 39% of the appraised vehicles/VINs had reconditioning estimates that were off by $1,000 or more from the actual reconditioning costs dealers charged to the vehicles.
These missteps often stem from rushed appraisals or assumptions rather than thorough evaluations. Left unchecked, inaccurate appraisals can lead to tighter margins, unexpected reconditioning overages, and lost opportunities to retail cars profitably. They may also erode customer trust when post-appraisal changes are required.
Transparent Evaluation
This is exactly why dealers are integrating OBD II dongles into their appraisal process and conducting walk-arounds with customers to assess their vehicles condition in detail. By presenting the good, bad and ugly (starting with the good, of course), dealers ensure a transparent evaluation that leads to a fair offer. Some dealers also incorporate retail market insights, such as the number of competing vehicles available and average mileage, into these discussions, helping customers better understand and trust the final offer.
When dealers and their appraisers take these steps, they avoid what I call the “flaw” of averages—the pitfall of relying on default reconditioning estimates for most of their appraisals. They also move beyond the outdated “at the desk” appraisal process, where a manager appraises a vehicle from their desk, while the customer waits elsewhere for an offer.
Dealers that embrace a more rigorous, hands-on process consistently outperform those who don’t. In fact, we see appraisers and sales associates who follow these best practices acquiring twice as many vehicles as those who don’t. Their look-to-book averages are better and, best of all, they consistently land the cars at more favorable cost to market percentages than their less-thorough peers.
Gaining a Competitive Advantage
In today’s retail environment, where competition for quality inventory is fierce and profit margins continue to narrow, each vehicle acquired and retailed effectively can have an outsized impact on overall dealership performance. Getting the appraisal right is no longer just good practice, it’s a competitive advantage.
The bottom line is that appraisal accuracy starts with process discipline. Incorporating technology, real-time market data, and transparent customer engagement strategies can help ensure every car is evaluated correctly and acquired at the right price. Accurate appraisals aren’t just about avoiding costly mistakes. They’re about maximizing opportunity, protecting gross margins, and building a smarter, more scalable used vehicle strategy.
Given the way used vehicle profitability has been declining, it’s wise to ensure your appraisers do everything they can to put the right money in every vehicle. Coincidentally this same disciplined process delivers a consumer presentation that provides transparency, is more informative and builds trust.
