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If you’re trying to gain more trade-in business, here is how to estimate trade-in value and gain trust at the same time
Receiving and selling trade-ins can be the bread and butter of used car dealers. As a business strategy, trade-in vehicles allow multiple opportunities for gross profit. Each vehicle creates two customers—the person who brought it to the dealership (looking to buy a different one) and the person who purchases it later. Plus, both create additional profits in servicing, parts, financing, and insurance.
If the car is the right fit for your dealership’s inventory, it’s important to estimate trade-in value accurately and transparently. Customers will be searching for the best price they can get, so give them the added benefit of knowing how you arrived at the initial value quote. Walking each trade-in customer through the process of valuation is a powerful way to close the deal.
3 steps to estimate trade-in value and close more deals with customers
1. Determine if the trade-in vehicle is right for your inventory
Before you discuss trade-in value, first determine if the vehicle works for the dealership. If the customer has contacted you by phone or email, ask questions such as:
- What is the current mileage?
- What’s the make and model year?
- Do you have a Carfax report? How many people have owned the vehicle?
- Has the vehicle ever been in an accident?
- Are there any visible dents or scratches?
With this preliminary information, you can better determine the vehicle’s value to the dealership. Smart dealers estimate trade-in value by how much they can sell a vehicle for on the lot and more. You have to consider all your options: retail, wholesale and auctioning. Will the cost of reconditioning the vehicle cut too far into your estimated retail profit, with additional servicing and financing included? Be sure to weigh all the variables.
Know your metrics and selling points, too. Ask yourself:
- How have similar makes and models sold in the past?
- What are the unique features of this particular model year?
- Are the parts difficult or expensive to acquire and install?
2. Walk the customer through a physical evaluation
Now that you’ve decided the vehicle is a match, it’s time to ask the customer to come in for a physical evaluation. If you want to land the deal, this procedure is very important to nail down. It’s likely that he has already contacted other dealerships for valuation quotes and may even have another appointment later in the day. Being transparent and walking them through the whole procedure is a good way to build trust and rapport.
If you haven’t created one already, it’s good to have a trade-in evaluation sheet ready for recording information. It can show the customer what details are important and give you a guideline to go by while checking the vehicle.
Important details to record:
- Double check the year, make, model, VIN numbers, and mileage.
- Ask for the vehicle title to determine prior owners and true mileage.
- On the outside, look for dents, scratches, bends, rust, faded paint, or other damages.
- On the inside, look for tears, burns, mold, floor holes, or broken equipment.
- Do all of the features and amenities work? (power seats, windows, A/C, CD player, etc.)
- Is the vehicle currently up to date with engine oil? How long has it been since the last oil change?
- Do all of the tires match? How much tread is remaining for each one?
- Is the engine compartment clean and free of leaks?
You may want to involve the servicing department and run the vehicle through a quick inspection. The mechanic can quickly look under the hood and check for fluids and any signs of wear. He may also suggest necessary repairs or services.
3. Use a third-party resource for reassurance
Finally, use the information you’ve gathered to support valuation estimates from third-party resources. It’s likely that the customer used Kelley Blue Book or AutoTrader to acquire an estimated trade-in value for his vehicle. Using the online calculators at these sites, you can input the recorded info from your evaluation sheet and come up with a base number.
Going through the physical evaluation beforehand will allow you and the customer to find common ground. When using Kelley Blue Book’s valuation tool, they ask you describe the condition of the vehicle. The choices are fair, good, very good, and excellent, and include a list of criteria to meet. To make sure you and the customer are on the same page, document any issues with the car and come to a decision based on the inspection together.
For example: “Okay, Jim. Given that the tires are worn considerably, and the body has minor scratches and dings to repair, would you agree that the condition of your vehicle falls under the “good” category?”
Be transparent with your estimates and build rapport with customers
The internet, digital technology, and access third-party resources have given consumers leverage in negotiating trade-in vehicles with dealerships. They also have the power to shop for deals online and contact several dealers before making a decision. What this means for you: be transparent with your estimates and give excellent service to win new business. If you build trust and rapport first, then closing the deal will be much easier.
Do you have any tips to include for trade-ins? What’s your opinion about using third-party resources like Kelley Blue Book? Share your thoughts!