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Dealers

Calculating Fair Trade-in Values

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The deal on the new car has been sealed, but there may be one important matter left undone. And that is calculating the trade-in value, what ultimately might clinch the sale or have the buyer changing his mind and leaving your showroom in search of a better offer elsewhere. Once you lose the customer there may be no going back. Here’s how calculating fair trade-in values will turn your shoppers into buyers.

Determine Trade-in Value Early

Dodge ChallengerIt is important for salespeople to determine whether a trade-in will be involved early in the sale. If the customer says that she will trade in her car, then ask for the keys to have it evaluated by your shop. Make it known to the customer that the evaluation is free and that her keys will be returned to her as soon as the appraisal process has been completed. In the meantime, continue with the negotiation.

Obtain the Vehicle History Report

At the same time the shop is reviewing the car, they should obtain the vehicle history report for the car.

It will serve as evidence to the customer if your offer comes in lower than her expectations. For instance, if the car has been in an accident, its value has been diminished even if the repairs were successfully completed. As the dealer, you know that the same vehicle history reports are available to customers, including people who want to buy the car from your inventory. You could lose money if you do not take previous problems into consideration, a fact you must share with the customer at trade-in.

There is another point that dealers must consider when accepting a trade-in. If the car involved is part of a major recall, including one that was initiated due to injuries or deaths, you are the one who will be held liable if something goes wrong, not the customer. That also means if the car is traded in with open recalls, you may lose time acquiring parts to make the car ready for sale.

Establish a Fair Trade-in Value

Lexus ES350Your appraisal team may be able to determine a value simply by examining the car. Of course, that is not enough as the value must be backed by hard data. A service such as NADAGuides.com should be consulted and it may also be the same service used by your savvier customers.

It is important that the information related to the car is precise, going beyond the make, model and year, and right down to the trim level, engine and transmission, mileage, and other details about the vehicle. Take note of the rough, average and clean trade-in prices as well as the retail price. Wherever possible, aim for the average trade-in price when presenting the appraisal to the customer. Adjust if necessary to account for low or high mileage and other factors. This will be your starting point for negotiation.

Present Your Offer

At some point in the car buying process, you will have the appraisal offer in hand to present to the customer. Your company’s policy may be to present the offer as part of overall negotiation, but the customer may want it handled separately.

Regardless of the policy, you will quickly learn if the amount offered has satisfied the customer. There is a very good chance that he’ll hold out for a higher amount. Be prepared to explain how that figure was determined, but don’t be surprised if the customer presents his own data offering different numbers. It is at this point when the business office will get involved.

Making it Fair

Audi A6What one person considers a fair value may be perceived as inequitable by the other, usually the customer. If the difference is a few hundred dollars, you might be instructed to meet the customer part way. It is at this point you need to gauge the customer to determine whether a deal is possible or if the sale is about to collapse.

For the salesperson, he may feel caught in the middle between the car shopper and his business office. The process can become especially difficult if both sides come armed with data and are firm in their positions. Fortunately, your company likely has some steps in place to help close the deal.

One of these steps may be to offer the customer something for free, such as paint or door protection. The retail cost of the item may more than offset the price difference, but only cost your company very little to implement. Do what is necessary to help the customer understand that the trade-in value is fair.

Satisfying the Customer

Your deal will close if the customer is satisfied. If not, you risk having the trade-in taken off the table. And in many cases, the trade will cancel the deal as it usually serves as the bulk of the down payment.

Ultimately, the business manager will either approve or nix the trade-in value. If the car being traded in is something your lot can turn around and sell for a significant profit, then more than likely your manager will bend to the customer’s wishes.

See Also — Dealers: Use Open Recalls to Drive Sales

Dealers: Use Open Recalls to Drive Sales

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With tens of millions of passenger vehicles recalled over the past year, there is a good chance that your customers own cars with at least one or two open recalls. An open recall means that the recall is incomplete either because the customer has not responded to the notice or the manufacturer has yet to provide guidance for when the work can be accomplished.

Open recalls present an opportunity for dealers to turn owners of recalled cars into buyers of new or certified pre-owned (CPO) vehicles. Specifically, you can leverage consumer concern about a recall by selling them a different vehicle and accepting that open recall vehicle as a trade in.

Dealers and Manufacturer Buyback

This past July, Fiat Chrysler (FCA) was ordered by the federal government to recall and buy back approximately 200,000 affected vehicles. It is the first time such an order was made and the details of that program have not yet been finalized.

dealers

Dealers: Don’t allow open recalls to sink your sales.

Although the buyback will be a costly one for FCA, it may prove to be a boon as well. Indeed, when the affected customers receive their buyback notices, they will be instructed on how to turn in their Ram or Dodge vehicles. Likely, most customers will be shopping for another vehicle to replace the one turned in, giving dealers a strong opportunity to combine those checks with their own incentives.

Likely, not just FCA dealers will be taking advantage of the buyback program either. Competing brand dealers can join in by wooing shoppers desiring to switch brands. Certainly, you will need to develop your own incentive program — perhaps with manufacturer backing — in a bid to win conquest sales.

(See Also — Attention Dealer Principals: Perfect Dealership)

Dealer Incentive Program

Your dealership already has an incentive program in place as you work with and independently of the manufacturer to increase your sales. To win owners of open recall vehicles, you need to think outside of the box. The following are some points to keep in mind for your dealer incentive program.

1. Train your repair shop team. If customers are coming in or calling your repair shop and are expressing frustration over an incomplete open recall, a sales opportunity may be possible. Specifically, by training your shop team to ask them if they would be interested in trading in their vehicle for another one, that effort could very well lead to a sale. If the customer expresses interest in making a trade, then the repair shop should refer the customer to the sales team.

2. Reach out to your customers directly. You already know which customers have vehicles with outstanding recalls. This is where you can task your marketing team to reach out to them through a direct mail or email campaign. The campaign might address their recall concerns and explain to them that you will buy back their vehicle or give them a competitive trade toward a new or CPO vehicle. If your advertising budget is especially large, then consider running a television or radio ad to reach out to owners of all open recall vehicles in your media market.

3. Address their concerns. An open recall can be a big concern for some, especially if a safety issue remains unaddressed. For instance, a parent with small children may not want to keep their crossover utility vehicle as long as the recall remains open. Here, you could explain that you will accept the vehicle as a trade in and will also cover the necessary repairs.

4. Offer something extra. Customers with an open recall may not have a new car on their minds, but that can change if you sweeten the deal and put a time limit on it. For instance, with gas prices trending downward, you might offer customers free gas for six months, but only if they make their purchase by the end of the month. Add in all available incentives, including the conquest discount for owners of all competing brands. Leverage every angle possible to turn a dissatisfied or concerned owner into the happy owner of a new or CPO Vehicle.

5. Offer special financing. The one thing that may hold some customers back is financing. If the vehicle is leased, find out if the leasing company would consider pulling the lease forward as long as the customer agrees to lease or finance a different vehicle. Some customers may be afraid that they’ll be underwater with their new cars (owing more money on the vehicle than it is worth). Have your finance team work on favorable loan terms and leasing options to allay those concerns. Certainly, keep in mind that as recalls mount, your competitors are looking at ways to win new business too.

Open Recall Considerations

Dealers must be careful about buying open recall vehicles. Besides otherwise having an acceptable vehicle history report, you need to complete the recall before selling the car to a new party. This means working closely with the manufacturer to ensure that parts are available and the recall can be accomplished.

If you fail to complete a recall and offer the vehicle as a CPO, you might be held personally liable if a defect leads to an accident. Lastly, consider the cost of keeping a vehicle in your inventory as you await replacement parts. Keep this mind: a vehicle you are not allowed to sell represents unavailable capital.

See Also — Ford Sale Unusual For Good Economic Times