Industry

7 Common Sense Appraisal Questions

Earlier this month while training a used car manager on appraisals, we were utilizing the latest and greatest automobile appraisal technology. I started thinking about the good ol’ days of flipping through that little black book.

Today we were looking at metrics like market day supply, average market price, cost to market, SRP’s, VDP’s, and many other automobile metrics to decide if we should keep or wholesale a particular car. Then if we decide to keep the used car, what ACV to give it. I began to reflect back to a time of used car management without market driven technology/data. Asking myself, “How in the world was I able to successfully run a used car operation without any of this technology or data?” Reminiscing helped me realize many of those old school techniques are still useful and incredibly important today. In fact, I realized the importance of combining the appraisal techniques of the past with the new market driven technology/data to ensure ultimate success!

After appraising a few cars together, we started to adjust pricing on the lot’s aged inventory. We noticed, some of these “lot rocks” had all the key metrics of a fast selling car, yet they were approaching 90 days old. Why were these cars still rotting on the lot? After all, they had low market day supply, and we were in the cars right. They were priced according to the market and sure looked good on paper!

 

7 Appraisal Questions to Consider When Bidding a Vehicle

1. What Alternative exit strategies do you have?

Most market driven data doesn’t factor in alternative exit strategy methods. Sure they have MMR, average book, NADA…etc. What about your wholesaler friends? Can you call them and ask for a bid on the car? Can you run the car at a silent bid sale? Does the car make a great secondary financed car that you should buy it regardless of your precious market data? Is it a car you could swap with another car from another rooftop in your group if you don’t sell it quickly?

2. How Abundant is This Car in Your Inventory?

To hit your used car objectives, maintaining the proper inventory levels is important; not just having enough inventory, but also having something for everyone. Do you have enough of those low priced cars in your inventory? Do you have enough third row SUVs in your inventory? If it is a truck you are considering, do you have any trucks in your inventory? Is this a fast seller in your market, but you already have 4 of them that you can’t sell? In the end, if you need to fill a hole in your inventory, sometimes buying one that doesn’t look that good on paper doesn’t matter. Transversely if the car looks good on paper, but you have several in your inventory that just don’t sell, this should affect your bid or disposition.

Remember: You can’t sell asphalt!

3. Is The Car Ugly?

Market driven data gets too narrow when you drill down to exterior and interior color on used cars. Ugly is ugly.

If the thing is a bad color combo, or has weird aftermarket appearance modifications all over it, bid it accordingly.
Market data doesn’t factor in cars that have been hit with the ugly stick! Don’t justify over bidding an ugly car buy with the saying, “There’s a butt for every seat.” You want to invest your available purchasing budget towards cars that more butts than one enjoy sitting in!

4. Are You Lying To Yourself?

Are you factoring in ALL the costs that affect what you will have in the car? It’s easy to put too much into a car when appraising it, if you lie to yourself about these costs! If you’re going to have to pack it, warranty it, paint it, service it, or add any other costs to it, you need to factor those things into your ACV. Look at the big picture before you justify bumping a buy bid. If you step up and bury yourself, even if the car is a fast seller that gets a bunch of SRP’s and VDP’s , the best data in the world won’t help it sell if your sales people know you’re buried in it and they won’t make more than a hundred bucks when they sell it! Some managers may avoid that scenario by not allowing their sales people to be privy to that type of information. Regardless, they will figure it out eventually, and you will know they have when that car with awesome market data is still collecting dust on your lot after sixty days.

5. Is The Car a Dirty Rat?

There are some cars that no amount of reconditioning can bring back to life. If it’s rough, just bid it as such, regardless of what your precious market data says. Nasty smoke smells, stained carpets, wheel damage, rust, deep scratches all over…etc. are all factors that make for nightmarish used cars that hang out on the lot, contrary to the so-called statistical facts! If it wasn’t taken care of on the outside, what will your mechanics discover when they open up the hood? When you run the car through your shop and you can’t keep the shop bill under four digits, do you think you also afford the four digit reconditioning bill? How long will it take to get this car to a sellable status? If it’s going to take three weeks to get the car front line ready, are you deducting three weeks of depreciation from your bid? Factor in how pigged-out this rat of a car is into your appraisal. Don’t be scared to walk away from a purchase or trade in if it makes you dry heave while sitting in it!

6. Do Your Sales People Like To Sell That Type of Car?

There are times when a car with horrible stats is a gem for your lot, if you have the right employee! Case and point: when I came to run a Hyundai lot from a Ford based lot, I continued to sell lower mileage, prior rental Ford Taurus Limiteds to friends and family members. Even though these cars had horrific market day supply stats, I had clients that loved them and wanted to buy them from me. An opposite circumstance: Let’s say you’re at an import store and you bring in the nicest domestic car with a low market day supply. The problem might be that your sales people would rather sell your certified, pre-owned or new cars for OEM spins. This domestic car could become an aged unit regardless of the market statistics, so bid the car accordingly. Use common sense and look at specific sales people’s track records with specific makes and models. If a credible salesperson has a demanding client base and wants you to keep a car with crummy data, you may want to keep it if you believe they will sell it!

7. Are You Trusting Your Gut?

Your experience, as a car sales person and a sales manager, has given you instincts that no market driven data can bestow upon you. If you don’t feel right about a car, or you just feel that you’re pushing the value, just get rid of the darn thing. Keeping one extra car won’t make or break your entire month or year. However, making poor buying decisions based solely on market data and no common sense could cost you sales and profit, while also causing you big headaches! If you’re nervous, hit it low, get aback up bid on it, and trust yourself in making the right decision. Ask your peers and co-workers for second opinions if you’re unsure. Have one of your mechanics look the car over if you’re curious about its mechanical condition. In the end, when you buy that car, it will be your profit and success, or pain in the rear and loss. Trust your gut and use common sense in conjunction with market data to ensure your used car inventory is one that turns at great speed and with maximum profit!

 

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