The Used Car Appraisal Process – How Does a Dealership Assign a Value to Your Car?Jan 22nd, 2015
As a car dealership manager, two of the most common questions I hear from customers on a daily basis are:
1) How much is my trade worth? and 2) How did you come up with that value?
In the past, car dealerships would rely on well-known resources such as Canadian Black Book, local auction pricing, or brokers to place a value on used vehicles. Today, many dealerships are moving to a “Market-Value” method of appraising. This new method uses computer technology to scan millions of vehicle ads online, within a specified radius, and provide the average selling price of the same make/model of the car being appraised.
Let’s use an example to illustrate how it works:
Joe Smith owns a 2011 Ram 1500 SLT Quad Cab 4X4 truck. He’s considering the purchase of a new truck and he wants to know what fair market value is on his trade.
1) The appraiser does a full walk-around of the Joe’s truck, making note of body/paint condition, tire wear, rock chips, and other general wear and tear items. Joe’s truck is then taken for an extensive road test to review the overall driveability of the vehicle (acceleration, braking, steering, suspension, etc).
2) The appraiser then enters the make, model, trim, and mileage of the truck into the computer. The computer program provides the average selling price of a 2011 Ram 1500 SLT Quad Cab within 50km’s. Let’s use $20,000 for this example.
3) The appraiser then deducts any expense needed to properly recondition Joe’s truck to the point where it’s ready for resale. In this example, Joe truck needs new tires, brakes, and a safety inspection which will cost $2,500.
4) Finally, the appraiser then deducts the expected profit he expects to make on the resale of Joe’s truck to a new customer. Due to the increasingly competitive used vehicle marketplace, dealers can no longer expect to make large profits on the resale of used vehicles. In this case, the appraiser is hoping to make $1,000.
5) The appraisal is finalized at $16,500.
Average market price = $20,000
Less $2,500 for reconditioning
Less $1,000 profit
Equals $16,500 appraised value
At the Trotman Auto Group, we utilize market-value appraising to provide our customers with a fair, accurate, and relevant value on their trade every time. If you would like a free, no-obligation trade appraisal, we would be happy to help.
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