There’s been much talk about what I call the rising tide of transparency in the car business.
If you trace the lineage, this tide started nearly 15 years ago as vehicle invoices and pricing became ubiquitous online. I remember the heated debates among dealers back then: Should we post our vehicles online? If we do, should we include prices? If we post prices, should they be the same or different than those we offer at our physical dealership?
Such debates are long gone. Most dealers, like other retailers, have embraced the Internet’s influential role in attracting vehicle shoppers and driving them to their showrooms to purchase vehicles.
But this is often where the rising tide of transparency hits a retaining wall. While many dealers understand that transparency matters for today’s vehicle buyers, they have yet to change showroom processes to reflect it.
For many customers, the hard-sell tactics and surprises they encounter in these dealerships is a turnoff. It typically leads to one of two outcomes: Customers either leave to find a friendlier and more transparency-minded dealer, or they’ll get addled and push back — which often results in deals with lower-than-necessary margins as salespeople give away profit to keep the customer happy.
The following are three ways Velocity® dealers have reinvented showroom processes as they sell used vehicles and appraise trade-ins to embrace, rather than resist, the rising tide of transparency-minded:
1. Market-based selling.
This approach seeks to leverage and capitalize on the way many dealers now price their used vehicles. That is, they understand their pricing must be market-competitive to earn the attention of today’s buyers. They also recognize that, when shoppers arrive at their dealerships, a specific used car and its price were the principal drivers for the visit.
In sales discussions, dealers highlight why the price for a vehicle reflects a fair deal for the customer. They show comparison cars in the market (noting color, condition, mileage and price differences) to effectively tell the would-be buyers what they’ve already concluded: This is a good price for this vehicle.
This transparency-minded approach offers three key benefits: First, its online-to-showroom consistency instills trust with customers; second, it gives salespeople confidence to stand behind a dealership’s pricing strategy; and, third, it results in a greater number of deals closing at or near each car’s initial asking price. A benchmark: Dealers who have adopted market-based selling report the average discount runs less than $250 per vehicle.
2. “On the money” appraisals.
When vehicle owners want to sell or trade-in their current vehicle, they go online to figure out what it’s worth. They look at classified sites (like Cars.com or AutoTrader.com) to compare their car against those currently for sale. They check online tools from NADA, Edmunds.com and KBB.com to get a bead on their vehicle’s value.
This online research dynamic has led a growing number of dealers to ditch the traditional “steal a trade” mentality and adopt an appraisal process that demonstrates why their offer is “on the money” compared to the broader market. The process includes walk-arounds with customers and a presentation that compares current cars and trade-in values in the market.
The end result: Dealers and their sales teams are more likely to hold the line on appraisals and give away less gross profit as they acquire a car. In turn, these dealers rely less on more costly auction purchases to feed their used vehicle inventories because they’re able to purchase more vehicles “at the door.”
“I think most dealers would be surprised how many customers they blow out with traditional appraisals,” says a Midwest Chrysler dealer. “I know I was before I made the switch.”
3. Process oversight.
Dealers who embrace transparency-minded processes actively inspect the results they expect. In sales, this means tracking the average discounts by individual salesperson. With appraisals, dealers track the difference between the initial “on the money” offer and the final actual cash value (ACV). Some dealers have gone further and incorporated these metrics into sales team and management pay plans to reinforce the idea that transparency is the new order of business — and to reward those who follow the processes necessary to achieve it.
I believe the rising tide of transparency will become more profound for our business. It will also become more problematic for dealers who fail to embrace it. To rework a well-known phrase, “a rising tide lifts all boats, except those with holes in the hull.”