One of the most challenging parts of closing a sale is justifying the trade-in value to a customer. Sales managers and consultants have several tools available to help establish value, including Canadian Black Book, online auction reports, VMRCanada.com, AutoTrader Instant Cash Offer, vAuto and CARFAX Vehicle Valuation Reports.
But the tool itself is only part of the process. A popular strategy today is to show customers how the trade value was established rather than simply presenting them with a number.
Start with the average asking price for comparable vehicles on AutoTrader.ca. This helps establish credibility because the customer may already have researched similar vehicles themselves.
Then explain that asking prices do not necessarily represent actual selling prices. AutoTrader.ca shows what sellers are asking, much like a real estate listing shows an asking price rather than the final transaction price.
From there, explain the costs and risks involved in selling privately.
Customers may lose the tax savings available when trading a vehicle toward another purchase. They may also need to pay out of pocket for mechanical repairs, cosmetic work and detailing before offering the vehicle for sale.
Selling privately can also be inconvenient. Buyers may haggle before seeing the vehicle, request viewings at inconvenient times or simply fail to show up. There can also be liability and security concerns when inviting strangers to your home or allowing them access to the vehicle.
Private sellers also face a smaller pool of buyers. A dealership can offer financing, while private buyers generally need their own financing or sufficient cash to complete the purchase.
All of these factors can help explain why the retail asking price of a comparable vehicle is not the same as its trade-in value.
Dealership costs matter as well.
One approach is to relate those costs to the customer’s own occupation. If your customer owns a business, explain that every product or service they sell carries overhead — rent, utilities, salaries, insurance, equipment, maintenance and other expenses.
A dealership is no different. There are operating costs associated with acquiring, preparing, marketing and selling every used vehicle. Some dealerships may also choose to show profit, advertising costs or commissions separately. How much detail you provide will depend on your store’s approach.
Next, review the reconditioning required to bring the customer’s vehicle to retail-ready condition.
Warranty coverage can also affect demand. Some buyers will pay less for a vehicle that is out of factory warranty, particularly if it is too old or has too many kilometres to qualify for extended coverage.
Whenever possible, have the customer present while the appraisal begins. If the vehicle needs brakes, tires, bodywork or detailing, showing those deficiencies can help establish realistic expectations about its value.
Once those expenses are identified, the customer can better understand how the dealership moved from a retail asking price to the actual trade value.
There are also several marketability factors that can affect what a dealership is willing to pay.
Age and kilometres are obvious considerations, but financing matters as well. Older vehicles may qualify only for shorter finance terms, which can make monthly payments less attractive compared with a newer, more expensive vehicle financed over a longer period.
Warranty coverage can also affect demand. Some buyers will pay less for a vehicle that is out of factory warranty, particularly if it is too old or has too many kilometres to qualify for extended coverage.
Trim level matters. Base models can be harder to sell because used-vehicle shoppers often see greater value in higher trims with more features.
Discontinued models can also raise concerns about parts availability and long-term serviceability.
Vehicle history is another factor. Accident repairs, theft recovery, multiple owners or other issues on a CARFAX report can reduce marketability and value. Vehicles originally built for another market may also require additional investigation into their history, specifications and warranty coverage.
Equipment and condition matter as well. Manual transmissions, poor fuel economy, missing popular features, previous paintwork, excessive wear or strong odours such as cigarette smoke can all limit a vehicle’s appeal.
The goal is not to overwhelm the customer with reasons their vehicle is worth less. The goal is to make the appraisal process transparent.
When customers understand how you arrived at the number, they are more likely to accept it.
Don’t just tell your customer what their trade is worth. Show them how you got there.
