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A Faster, Simpler Trade-In Process
Dealers understand just how excited customers can be when shopping for a new vehicle. The joy on their faces is evident when they step foot in the dealership, when they begin discussing different vehicles with a sales person, and when they take those cars out for the first test drive. The whole car-buying shopping process is one of wonder, and it is dealers’ jobs to ensure it is a seamless, painless journey.
However, oftentimes the car buying process can be an extremely frustrating endeavor. Recently, Autotrader’s Car Buyer of the Future Study conducted a thorough examination of the current car shopping, buying and ownership process. The company surveyed roughly 4,000 consumers about their ideal process. A mere 17 car shoppers and buyers out of 4,002 —less than 1 percent — described the current process as ideal.
One specific pain point is the car shopper’s inability to properly evaluate a fair trade-in value for their vehicle – they lack the knowledge and confidence to properly pinpoint a price for their current vehicle. Providing appraisal tools that work with your inventory listings is a simple solution that can help car shoppers combat this issue. But, those tools need to be backed up by a wealth of data from reputable sources in order to bolster trust between car shoppers and dealerships when seeking fair value for trade-ins.
To make the trade-in process faster and simpler, dealerships can offer online appraisals for the consumer’s vehicle. Attractive to customers, these tools grab a potential car seller’s attention and help connect the two parties online. First, customers must provide their vehicle’s make, model, year, and condition. Then, using a multitude of data sources and industry analytics including local market conditions, an evaluation generates an actual offer. Finally, upon a dealer inspection of the vehicle to confirm accuracy of the information, the seller hands the dealer the car’s keys, and dealers hand customers their money, provided title is clear.
Yet, that’s easier said than done. The steps in the retail car shopping process have not changed in over a half century. While tech has changed how car shoppers research and select their vehicle of interest, not much has changed how they test drive it, have their credit checked, then work through the four squares to determine the terms of the deal: overall price of vehicle, down payment, monthly payment and the trade-in amount.
But, while these steps in the car buying journey haven’t changed, the way consumers approach and go about them have evolved. Today’s consumers want to own their shopping experience whether they are buying shoes, a smartphone or a new vehicle.
Trade-ins can pose a significant psychological challenge - as much as a financial one. A good amount of expectation setting and education must take place during the trade-in evaluation process. Neither the buyer nor the seller want any anxiety or surprises to stall the deal. In general, the typical consumer is a bit defensive of their trade. Going through a detailed checklist of items, such as mileage, wear and tear, and accident history can bring reality back into the picture.
On the other side, when a dealer sees the consumer has accepted an evaluation from a highly-trusted source, they know they are starting off on the same page. This allows the salesperson to convert or bridge the online to in-store experience more seamlessly.
Most customers want and some even need to get fair value for their current vehicles prior to buying new models. According to the 2016 Disposer Study provided by KS&R, 33 percent of the market have disposed of a vehicle in the past 12 months. Of them, 40 percent have done so at a dealership, 33 percent traded-in their vehicle citing it was easier, faster and they received a good deal, and 28 percent said they needed to use the trade-in amount as a down payment on their next vehicle.
Additionally, 73 percent used KBB.com to determine their trade-in value, 42 percent of those trade-in valuations had a direct impact on the price of the next car, and for 37 percent, the valuation was a deciding factor in whether to purchase the next car.
Instant Cash Offers on KBB.com in June were 62% higher than the same time last year. (Source: KBB.com internal data, June 2016 comparison to June 2017) Instant Cash Offer activity on Autotrader is also up 3 percent (YOY) and dealer activity is up 10 percent (YOY).
Year to date, Instant Cash Offer Participating Dealers are enjoying a healthy 29 percent close rate on Kelley Blue Book Instant Cash Offers and 16 percent redeemed their Offer at a Participating Dealer and 13 percent attempted to redeem them. Additionally, 75 percent of Instant Cash Offer users said the tool was valuable and helped them negotiate their trade-in amount.
The Kelley Blue Book Instant Cash Offers are inextricably tied to the overall retail market. When new car sales dipped in March and April 2017, we saw similar dips in Offer volume, but the average redemption rate for last 12 months has been 18.7 percent, according to the 2017 Instant Cash Offer Consumer Follow-up Study provided by KS&R.
Put simply, both car shoppers and dealers can benefit from the trade in-process and online appraisal tools in multiple ways:
- The appraisal tools build trust among car shoppers and help bring those online shoppers into car dealerships
- Additionally, trade-ins grant dealers convenient access to used cars enabling them to build up their inventories and move vehicles faster
- Finally, trade-ins help dealers identify these customers as extremely strong leads allowing your employees to connect with transaction ready, in-market shoppers who are ready to get a deal done
Finally, current market conditions are conducive to positive equity during the coming peak summer selling season:
1) Interest rates are still very low.
2) Trade-in values are stable, but will eventually take a hit from the growing inventory surplus.
3) Consumers who bought a car during the historically low APR years of 2013-2015, probably have more positive equity than they realize.
Most importantly, your buyer will have their new ride just in time for summer road trip season!
Juan Flores is Director of Product for Kelley Blue Book and can speak to these market conditions and share insights about how the Trade-In can be a make or break point in the car shopping process.