Determining pricing in a used car trade-in can be one of the most challenging day-to-day responsibilities in a dealership. With many factors to consider—including the market, the business’ sales trends, the customer’s needs, and the condition of the car—landing on the right price can become complicated. In this article, we will outline the most common mistakes car dealerships make when managing trade-ins so you can work to improve your business and used car operations.
6 Mistakes to Avoid in the Car Trade-In Process
1. Over- or Under-Valuing the Vehicle
Agreeing on the perfect price is the best-case scenario—but this is hard to achieve, and appraising above or below fair market value can have consequences for dealerships. Naturally, valuing the vehicle above market price means you run the risk of a small or entirely absent profit margin when you sell the vehicle.
Furthermore, valuing the vehicle below the fair market rate can cause your dealership to repeatedly lose trade-ins to other businesses that offer customers a better price. While it makes sense to aim for the lowest price as a way of boosting profit potential, customers will know if you’re underselling them and will tend to look elsewhere. Plus, word of mouth can hurt your business in the long term as potential customers realize your dealership doesn’t offer the best opportunities—your brand reputation and trustworthiness can suffer as a result.1
2. Negotiating in an Overly Emotional or Negative Manner
While negotiating is part of the process, it’s important to keep the interaction with customers friendly and professional so they actually do want to do business at your dealership. Too often, inexperienced salespeople fall into a pattern of pointing out every flaw with the customer’s vehicle in an effort to lower the appraisal. This is an effective strategy in moderation, but make sure you are not berating the customer. You want them to complete the sale at your business and eventually purchase their next car with you, so they’ll need to feel comfortable and welcome during the trade.1
3. Allowing Salespeople Who Lack Experience to Do Appraisals
As mentioned above, allowing junior or inexperienced employees to complete appraisals can have negative repercussions. Many dealerships experience a high turnover, and in the absence of more experienced used car professionals, new workers may step in. When this happens, the dealership runs the increased risk of an appraisal being largely over or under fair market value because an employee underestimated the vehicle flaws or unknowingly insulted potential customers with low-balled offers.1
4. Underestimating Repair Costs
One common mistake for appraisers is underestimating how much it will cost to complete all repairs and get the vehicle sell-ready. Going into any negotiation, it’s important to have a clear understanding of the costs of all possible repairs, as well as the likelihood that you’ll see a return on these investments in the selling process. Keep a pricing sheet with you to reference for each issue so you have all the information at your fingertips.2
5. Ignoring Distinguishing Qualities
A main cause of under-valuing a customer’s vehicle is failing to price in the special qualities. This can include rare color options, finishes in the interior, enhanced electronic systems, sunroofs, four-wheel versus two-wheel drive, and other variations that can have different levels of desirability depending on your customer base, geography, and more.2
6. Using an Inflexible or Complicated Online Tool
It’s important for dealerships today to include appraisal tools on their website so customers can enter the negotiation with accurate information that the dealer is also referencing. However, if you use a tool that is overly complex or inflexible, you run the risk of customers failing to complete the form or putting in placeholder information that renders the estimate inaccurate.
Use ClearCar to Provide Accurate Car Appraisals Online
If you want to enhance the car trade-in process at your dealership, add ClearCar’s vehicle appraisal tool to your website so customers can get an accurate trade-in value estimate. Our easy-to-use interface and design make the tool simple for customers and dealers alike. With this information, your negotiating process can be simplified and streamlined. Schedule a demo with ClearCar to learn more today.
Sources
- Unrau, J. 2018. “Five Common Mistakes Dealers Make in the Trade-In Process.” CBT News. Retrieved April 29, 2024. https://www.cbtnews.com/five-common-mistakes-dealers-make-in-the-trade-in-process/
- Carbly. “5 Common Dealership Mistakes When Appraising Cars.” Carbly. Retrieved April 29, 2024. https://getcarbly.com/blog/5-common-mistakes-when-appraising-cars/
- DEP Marketing. “Is Your Trade-In Tool Guilty of These 4 Common Problems?” DEP Dealer Process. Retrieved April 29. 2024. https://www.dealereprocess.com/is-your-trade-in-tool-guilty-of-these-4-common-problems/
