It’s only logical that your dealership’s appraisal process determines the profit potential of each used vehicle you acquire. Every retailing decision starts with that initial assessment of value. If the car appraisal is off, you’re more likely to lose money by the time the car sells. But if you rely on a consistent process, you’ll help your dealership optimize the profit margin on every vehicle.
Auto Appraisals Vary Widely
If you’re not sure if appraisal variability is an issue for your dealership, then it probably is. At least you’re not alone — appraisal variability is a common problem. Individual appraisers often take different approaches when determining vehicle condition, optimal purchase price and recon costs. The difference in approach ultimately yields different calculations, even regarding similar vehicles within the same market — and we’re seeing the evidence at dealerships across the country. Specifically, recon estimates can be off by up to $500, which directly impacts gross profit margins.
Reasons Behind Car Appraisal Variability
It’s important to understand why appraisals often vary so widely between and even within dealerships. The variability stems from differences in:
- Appraiser skills and training
Not all appraisers have the same capabilities and level of experience.
- Time allotted for the appraisal
Rushing through the process can cause oversights.
- Dealership guidelines
Appraisal rules, metrics and supervision vary by dealership.
- The vehicles themselves
Each car comes with a unique set of circumstances that influence the appraisal.
- The appraisal process and the pricing process
The person deciding car prices doesn’t usually know all the factors that go into the appraisal, and this lack of insight impacts the vehicle’s retail outcome.
Some of these differences are out of your control, but you can mitigate them by implementing a more consistent appraisal process.
Making Auto Appraisals — and Profit Margins — More Consistent
The key to a more consistent and profitable appraisal process is to use a strategy-based approach that targets your dealership’s profit and volume goals. This way, appraisers can work backward from a range of retail car prices to determine the appraisal value. And if they decide to acquire a vehicle above or below the strategy target, they should communicate their rationale to the person pricing the vehicle. When the auto appraisal and pricing processes are connected and everyone is working toward the same target, you make more gross on each vehicle.
Long-term Value of Consistent Appraisals
Over time, a more consistent appraisal process helps your dealership become more profitable overall. And if you monitor your appraisals and car prices, you can easily identify appraisers who might need more coaching — and make decisions about when your strategic target needs adjusting.
The Importance of Appraisal Tools
The right appraisal tools can help your dealership implement a consistent, strategy-based process for appraising cars. Many dealers have found that vAuto’s ProfitTime® GPS helps elevate appraiser accuracy, consistency and performance. That’s because ProfitTime GPS is designed to optimize your ROI on each vehicle, beginning with the appraisal. The tool helps you strategically guide and measure appraiser performance and recommends appraisal values and pricing based on your dealership goals.
Dealers often use ProfitTime GPS in combination with iRecon, vAuto’s solution for optimizing the reconditioning process. iRecon helps you improve the accuracy of your recon estimates during appraisal so you can maximize your profit margins. When used as appraisal tools, both ProfitTime GPS and iRecon help you avoid losing money during the used car retailing process.
To learn more about how vAuto’s software solutions can make your appraisal process more consistent and profitable, request a demo today.