Here’s a question every dealer should answer: Are we appraising at least as many cars as we sell?
The question’s critically important for three reasons:
- Few dealers have traditionally asked the question. When it comes to appraisals, many, if not most, dealers will evaluate their Look to Book ratios to see if they’re close to the industry benchmark of 50 percent. But, they often do not consider the volume of appraisals and its impact on the number of vehicles they could, and perhaps should, acquire for their used vehicle department. This reality leads to the second reason.
- Appraisal volume isn’t where it used to be for many dealers. That’s due to vehicle owners coming to understand that they can sell their vehicle to companies like CarMax or Carvana and then go to a dealer to purchase a replacement vehicle. The result? The appraisal and trade-in opportunity that dealers could reliably count on in years past isn’t as certain in today’s marketplace.
- Dealers often don’t have an accurate view of appraisal volume, even when they look for it. When I was a vAuto Performance Manager, I had countless conversations encouraging dealers to hold appraisers accountable for entering a value and finalizing appraisals. The reason: If appraisers don’t finalize an appraisal, it’s like it never happened. Even worse, if you don’t finalize an appraisal, you lose the ability in vAuto to see if a vehicle/VIN you appraised and missed lands at another dealership in the next 60 days. That’s a powerful insight I wouldn’t want to operate without—especially in today’s environment where inventory’s difficult to get, success requires mining multiple channels (like your service drive and private sellers) for vehicles and you need finalized appraisals, marked for each source channel, to achieve it. Remember: Appraisals are money, and they always say follow the money.
It is for all these reasons that I believe now’s the time for dealers to work on improving their appraisal to sales volume. Think about it: If you are appraising more cars, doesn’t it stand to reason that you’ll bring in more retail-worthy inventory?
My recommendation is that dealers should start this effort by re-examining how often appraisers select a specific source (street purchase, trade-in, service drive, sight unseen, lease return, etc.), enter a value, then finalize. (If you’re a vAuto dealer, your Performance Manager is happy to help you configure these settings and direct you to new, detailed reporting to inspect what you expect. We call it measuring your appraisal effectiveness.)
From there, you’ll have the baseline for performance improvement that helps you put more offers on more cars, across more channels, and make more deals.
