The automotive industry has undergone significant changes in recent years, particularly in how vehicle appraisals are conducted. As dealers adapt to a data-driven market, they increasingly rely on technology to make more informed decisions about inventory, reconditioning, and sales strategies.
Data now serves as the foundation of the appraisal process. Diagnostic innovations allow dealers to access real-time insights into a car’s condition by tapping into its “brain.” This data provides a detailed picture of the vehicle’s health, which, when combined with a solid understanding of reconditioning, offers dealers a substantial edge in assessing the car’s true value and market potential.
However, gathering data is just the beginning. Dealers must identify the ideal end user and determine the optimal condition in which to present the vehicle to ensure a swift sale. Over-reconditioning a car for the wrong customer can drive up its price, making it less appealing and keeping it on the lot longer than desired. Striking the right balance in reconditioning is crucial to making the vehicle both attractive and competitively priced.
Consumers Willing to Travel
In the past, customer profiles largely dictated a dealership’s inventory choices. Today, however, buyers are more willing to travel to find the exact car they want. This shift has reduced the focus on the dealership’s physical appearance and increased the importance of online reviews and customer satisfaction.
The reconditioning process, which should take around three days, now varies based on the vehicle and its target market and can take between 13-15 days total. Dealers must carefully balance the time and cost of reconditioning with potential profit margins, adopting a more strategic approach to both inventory management and sales, in order to target the right end user for each vehicle.
Appraisal Process and Acquisition Strategies
Accurately appraising a vehicle has become more nuanced with the advent of new technologies, and the availability of more advanced data, as outlined above. Dealers now start the appraisal process within inventory management systems, using transactional data, market supply information, and OBD2 scanners during walk-around inspections. These scanners provide immediate insights into the car’s condition, complementing data sources like Carfax, which offers a historical perspective.
This combination of current and past data allows dealers to make more informed assumptions, setting the stage for a successful reconditioning process.
Mike Boyd, Managing Director, Repair OnDemand will present a session titled Scaling Used Car Operations Effectively at the 2024 Digital Dealer Conference & Expo (#DDCE2024)!
As the appraisal process has become more nuanced, the traditional approach to acquiring inventory has also become more complex. Previously streamlined, the process now requires a multi-channel approach, spanning from the service lane to leveraging social media. Consumers, empowered by technology and data, understand that they can sell their car to a dealer or another consumer without needing to trade in.
As a result, dealers must create confidence and offer fair value to attract these informed customers. The rise of online retailers like Carvana and CarMax, which operate as tech and data companies, has further emphasized the need for a data-driven approach to inventory acquisition.
Selecting the right vehicles for a dealership’s inventory is no longer just about what’s available; it’s about understanding market demand and the dealership’s ability to recondition the car cost-effectively. Auctions, once a reliable source of excess inventory, have become more challenging post-COVID. Dealers must now consider a wider cross-section of vehicles and ensure they have the right resources to strike a balance between acquisition cost and reconditioning investment.
Market Strategy and Execution
Evaluating the success of appraisals and sales strategies hinges on specific metrics, like the look-to-book ratio—how many appraisals convert into acquisitions. Other factors include the average time to resale and the effectiveness of reconditioning investments. Dealers must assess whether their reconditioning efforts are adding value and contributing to higher margins or simply adding additional cost and slowing down their turn rate. Understanding these metrics allows for adjustments that can improve profitability.
The other crucial piece of effective vehicle reconditioning and sales is fostering collaboration between Fixed Ops and the Sales Department. Despite being distinct functions, both departments ultimately serve the dealership’s overall profitability. Aligning their efforts ensures that both are spending the right amount of money on reconditioning, and optimizing the vehicle for resale.
Inter-departmental collaboration requires transparency and accountability, with both teams working together to understand costs and adjust processes accordingly. Data trails again play a critical role here, enabling dealerships to analyze outcomes and refine their strategies.
Future Outlook
As the automotive industry continues to evolve, dealers need to stay ahead by leveraging data to understand market trends and identify the right end users for their vehicles. The ability to adapt and innovate in response to these changes will determine success in an increasingly competitive landscape.
By focusing on data-driven decision-making, strategic reconditioning, and cross-departmental collaboration, dealerships can navigate these challenges and thrive in the modern automotive market.
includes significant roles at Cox Automotive and founding iRecon, which vAuto acquired. Renowned for his business acumen, Mike excels in team building and operational efficiency, focusing on innovative solutions that enhance customer engagement and streamline dealership processes, marking a career committed to automotive excellence and transformative leadership.
