by Jim Leman
CHICAGO – Consumer-centric vehicle trade-in tools are fertile ground today for dealers’ competition for buyers.
More sophisticated than ever, these tools offer more confidence, transparency and often a guarantee for consumers hoping a dealer will buy their car — and for dealers looking for the kind of trades (at the right price) for their used-car departments.
But I’m showing my age — Oldsmobile was an 106-year-old General Motors brand last manufactured in 2004, and I have traded cars when the used-car manager studied a cigarette-pack-sized used-car valuations book, scribbled a figure on notepaper and then slid that information across the desk, the trade-in value.
Consumers may not have had much context around that number. And some early disruptors saw an opportunity.
Hence, today’s trade-in evaluation tools, which brought this mysterious process into the light. They let consumers check a few boxes on the online valuation form, such as mileage, condition and special options or accessories, and the tool calculates a range of values for that car.
Consumers increasingly knew the brand names behind those calculator engines, but there is still potential for uncertainty around trade-range values, especially when the consumer showed at the dealership where the value the used-car manager or appraiser offered was often not what the consumer had expected.
Any time an online car-shopping experience encourages consumers to believe one thing and then they experience something entirely different at the dealership, caution bells go off, and friction enters the process. That’s unfortunate for both the shopper and the dealer.
That is a pivot point not serving any party, which is why this new generation of trade tools hopes to move consumer and dealer closer over values they both can embrace.
Jumpstart Automotive Group’s “Today’s Auto Buyer and the Digital Retailing Experience” report from September indicates that 84% of car shopppers conduct online research. What’s more, the same report said 70% begin their shopping on either a dealer or third-party website.
“Instead of shopping around at multiple dealerships, consumers start their research online, and they may complete the shopping process before they even step into a dealership. While people used to visit five to six different dealerships before buying a car, today, they typically visit only one to two, our research found,” Jumpstart said in the report.
In starting the process online, their first real connection with many dealers at this point might be with the trade calculator app on their websites. Isn’t this the most sensitive pavement on the new road to the sale, on which opportunity is fostered or not?
“Classically, the consumer will walk in with a trade, unsure of what to expect in terms of the process and vehicle value, and expectations on both are frequently missed, and that’s not a good experience,” said Colin MacGillivray, vice president and general manager for Kelley Blue Book. “With our trade-in tools, I’m trying to bring that consumer and the dealer into a superior experience, and for the dealer that’s the moment when there is a great opportunity to compete and win the consumer.”
Brian Skutta, executive vice president of dealer sales and service at TrueCar, agreed: “Given today’s online vehicle selection and pricing transparency, the trade is now the big question mark as the vehicle still has to be priced, and the vehicles’ condition confirmed in the store.
“The trade has now become an even larger enabler of the transaction, and we are now seeing dealers moving that phase of the road to the sale up to second or third place to get this part of the transaction addressed right up front so the remainder of the process can be as efficient as possible,” he said.
Bank on it
Last year, Car and Driver, owned by Hearst Autos, announced the release of its new Trade-in Value and Credit Score tools “to make the buying process easier for both dealer and consumers,” Auto Remarketing reported.
Powered by Black Book, the trade tool provides consumers with a three-step trade value. The credit score app, powered by Equifax, prompts the shopper to provide limited personal data to receive affordability estimates.
Cox Automotive, whose companies include Kelley Blue Book and Autotrader, among many others, said that under Kelley Blue Book’s Instant Cash Offer, consumers receive a trade value valid for three days. Consumers may redeem the offer at participating dealerships. Dealers can retail the trade-in or liquidate the vehicle back at their local Manheim auction.
J.D. Power launched its new lead generation tool for dealer websites, Value My Car, the company announced in a March press release. The tool is a dealer-only product, which dealers place on their website. After using the tool, consumers are encouraged to come into the dealership for “an in-person appraisal.”
“This will not only provide a service to a potential customer as a first touch-point, but will also ensure potential sales opportunities for the dealerships being tracked,” said Jonathan Banks, vice president of vehicle valuations at J.D. Power, in the release.
Responding to questions via instant messaging, Steve Brooks, manager of business development for J.D. Power, noted that, “Dealers understand that there are two types of tools available, guaranteed and non-guaranteed values. For a model that is start-to-finish online for a vehicle purchase, a guaranteed model is necessary, but to maximize activity and volume the non-guaranteed value model is better, because it delivers higher value to the consumer,” he said.
“We see some dealers using both models simultaneously on their websites. These tools are great for lead generation and being able to supplement their inventory acquisitions along with wholesale auctions. Most dealers will buy a consumer’s car without the customer purchasing one of theirs,” Brooks said.
TrueCar Trade, TrueCar’s trade-in product, offers real-time pricing updates powered by Galves Accu-Trade. Consumers can access the tool at TrueCar.com (and some of its partner-branded car buying sites) as a widget embedded on a TrueCar-participating dealer website, or when a consumer visits the showroom for a trade-in or sale evaluation.
“We find that the best practice is to let the customer take control of the evaluation, leverage third-party tools like TrueCar Trade and then work with the customer during the trade walk to finalize the evaluation,” Skutta said.
Skutta advises dealers to conduct the trade walk with the customer using the same evaluation tool for the process.
“This shared walk enables the dealer to identify with the customer any inconsistencies in the original vehicle description and edit the evaluation accordingly. It’s the tool recalculating the offer,” he said, “not the dealer, which leads to consumers having more confidence and trust in the transaction.
“This is a very collaborative and disarming way to reduce friction in this step. We’ve found that when the dealer does the trade walk with the consumer, the consumer is 1.4 times more likely to transact and three times more likely to give that experience a five-star rating,” Skutta said.
A digital conundrum
Interestingly, Jumpstart noted in the 2018 report that “digital research (consumers do as part of their car shopping) may hinder as much as help because consumers do not trust that dealers will honor prices that they see advertised online.”
The report also noted consumer concern with the trade evaluation process. The Jumpstart study noted that 57% of survey respondents put ability to obtain the value of their current car as among their top 10 helpful online content and shopping tools, with 30% indicating they rely on third-party websites to get this information.
Thirty-eight percent of consumers, the report noted, ranked getting trade-in value as their “most-preferred online shopping activities.”
When these consumers explained visiting a dealer website, however, obtaining trade value information wasn’t among their reasons.
Instead, the cited the reasons for visiting the dealer website as inventory search, car pricing, special offers, dealership information, and dealership pricing or quotes.
Black Book has noted how critical history-adjusted valuations are to trade-in values. A 2017 infographic from the company noted that historical data is essential to present “what that car is worth. And that could end up affecting your (dealer) bottom line,” the infographic noted.
Through instant messaging, Jared Kalfus, executive vice president of revenue at Black Book, said the company might revisit this study this year “to see how things have evolved” since.
“I can share with you that from the intersection that Black Book sits in, where our data is utilized by a tremendous share of the dealers, OEMs and vendors that specialize in trade solutions, precise and transparent vehicle appraisals continue to be paramount in the mind of consumers. Our business continues to grow as a result of this, and demand for this type of data is significant. There has been a shift in vendor approaches as well,” he said.
For dealer Greg Shortridge, general manager at Duncan’s Hokie Honda in Christiansburg, Va., the value of presenting trade appraisal tools on his website is to help consumers and his sales associates bridge consumer trade evaluation speculation and enter into trust.
“Our goal is to acquire as many trades as possible, but we don’t want customers pressured. Using The Appraisal Lane tool gives consumers an independent, third-party appraisal of their automobile,” Shortridge. “And the tool also helps me understand the current market value for the trade, so we don’t miss the opportunity.”
Kelley Blue Book’s Instant Cash Offer trade tool drives toward accomplishing that goal, too, MacGillivray said.
If the dealer doesn’t want the car at the appraised value after taking in the trade at that cited value, Kelley Blue Book acquires it from the dealer within three days for disposal.
“One of our goals is to make the journey seamless for the consumer. We know that most consumers conduct their vehicle shopping research with Kelley Blue Book. It becomes seamless when they also see and utilize a Kelley Blue Book trade-in tool on the dealer website, and likewise that process also drives their experience in-store, both for the trade-in and any follow-on retail purchase. It’s about managing expectations, building trust and driving a great consumer experience.” MacGillivray said.
“To the extent the dealer can have Kelley Blue Book on their website and offer our Instant Cash Offer, the consumer sees the Kelley Blue Book branding, which manages the transition from the brand trust into the dealership experience,” MacGillivray said.
“This is a process change for the dealership — ensuring all people are using the same evaluation tool. We also encourage full adoption of the same evaluation tool throughout the dealership, including its use in the service lane, and it is one of the best practices for success in the long term for the dealership,” MacGillivray said.
The Appraisal Lane offers a value range powered by Black Book for consumers who are just starting their research. When they’re ready to transact, they download The Appraisal Lane app on their mobile device to interact with expert appraisers who give them a guaranteed cash offer in 30 minutes, said Dan Moran, director of sales.
He said winning a customer’s trade is critical for the dealership.
“By the time customers visit a dealer, they’ve already vetted the dealership and checked online reviews, so the dealer gets one shot — and if it’s a miss, the consumer goes to the dealer down the street. Dealers must create transparency like any other retail establishment, and if they don’t (market) the way consumers’ shop, their dealership will go by the wayside,” Moran said.
Consumers using The Appraisal Lane take photographs of their vehicle, as recommended by the app, and upload them. They answer questions about the condition of their car and are then connected to live used-car appraisers.
Dealers must become part of The Appraisal Lane network to participate.
“Dealers use our number to close more retail deals, or they can step back from our number — or over it — to make it work for them. We give them the flexibility to improve their business,” Moran said.
As dealers strive to deliver seamless end-to-end retail experiences for customers, the human connection is still important. J.D. Power’s Brooks said best trade-in practices should always include good human communications.
“J.D. Power recommends that the dealer contact the customer as soon as possible,” Brooks messaged. “This communication should mention the J.D. Power trade in, and they should try to schedule an appointment for a personal appraisal for the customer at their dealership. The dealership should incorporate the use of the tool during the in-person appraisal to leverage our trusted brand with the customer.”
Kelley Blue Book’s MacGillivray said, “Again, this is a process change for the dealership. If you use different tools at different points, each use resets the customer’s expectations, and that causes friction. You see where it breaks down. Complete adoption and consistency is key to success.
“Trade evaluation tools today are about much more than simply acquiring inventory; this is ultimately about winning the consumer and driving profitability for the dealership,” MacGillivray said.