Common Mistakes Dealers Make When Managing Trade-Ins

Trade-ins! As a dealer, you will know that a lot can rely on a customer’s trade-in. Members of NADA have reported that around 65% of inventory comes from trade-ins on new and used car sales. Nothing is specifically tracked to make a solid claim from this reported number, but using it as a guideline we think it’s safe to say half of all sales involve a trade-in of some sort.

So if so many sales rely on them, people must be making some mistakes and a mistake with a trade-in hits your bottom line, and in turn the value you can sell this vehicle at an auction. So what are the common mistakes and how can you avoid them?

Slamming the customers trade-in

Don’t do it, just don’t it won’t do you any favors. Used car salespeople often call out the faults in a trade-in vehicle to try and drive down the price, this is fine but it’s important to not get emotional. People get emotionally attached to their vehicles so don’t be surprised if a customer walks away if they feel like they are being dealt an unreasonable hand or if they feel their pride and joy is being insulted. It could also have a knock-on effect in terms of other business, the best advice we can offer here is to be objective, clear and explain to a customer work that would be required. People are far more likely to understand where you are coming from with your price as a result. That brings us onto our next point.

Not offering a fair market value

This was is important as over or undervaluing a trade-in vehicle is only going to impact one thing…your pocket.

So in the third and fourth quarters of the year salespeople are far more like to offer a higher valuation on a trade-in to secure the sale. While that’s all well and good for the salesperson, the used car department a sizeable headache. With no profit margin and no hope for a sale at a higher asking price you might be lucky to break even on the transaction.

When it comes to undervaluing, it really comes down to some peoples temptation to offer a low trade-in value. They do this to avoid buying unwanted used car inventory or to leave money in the bank for more profitable deals. Sure it’s an excellent tactic from one standpoint but on the other it sends potential customers to dealers who will offer them a fair price and in turn who do you think they will tell their friends and family to visit? Under valuing can cost you more than just one sale, always keep that in mind.

Running unskilled valuations

It happens sometimes, a dealership can have a high turnover rate of employees for whatever reason and often that means an unseasoned salesperson is pushed into a higher position, for example the used car managers role. These people don’t have the experience or training needed to perform a correct appraisal. This in turn means you are likely to have some appraisals that are higher or lower than they should be. This isn’t shady dealing but to a customer the experience often feels the same.

It can cost you a sale or take away any potential profit on a sale and potentially damage your dealerships reputation. To avoid this you should train your staff to a high level, give extra suppor tto new employees and get them to a level where they can fairly appraise each trade in.

Bidding Blind

Last but not least a common mistake dealers make is actually a very simple one to resolve. Valuing a car blind is a huge error of judgement and let’s be fair when you think about it you’re bidding on something you’ve never seen. Today there are a few websites around that offer “quick” appraisals.

This in practice doesn’t work, customers can often times have inflated value of their vehicles true worth and are thus disappointed when the dealer can’t or won’t maintain the trade-in value. These sites are two-way street dealers can also feel pressured to give a customer the value offered online to not lose the sale.

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