Used Car Sourcing and Predictable Appraisal Accuracy

By Anthony Greenhalgh, AutoSuccess

"All used car managers share a big fear – making a mistake."

Dealerships in 2024 will continue to face used car sourcing challenges. 

A recent Automotive News article by reporter CJ Moore netted the issue: "Dealers navigating a used-vehicle market that already allows little room for error are eyeing another obstacle: worsening used-car availability."

According to Black Book data:

  • Seven to 10 million fewer new vehicles were sold during 2020-2022 compared to 2016-2019.
  • Few vehicles were leased from 2021 to 2023.
  • Rental and fleet companies did not replenish their new car inventories.

Trade-ins remain essential, so when their owners walk through the door, give them the fairest offer you can – and be sure the spread you need isn't diluted by appraisal oversights that:

  • Cost you potential sale and service customer.
  • Erode profit when appraisal recon estimates don't match their actual costs.

Eliminating wide appraisal variances and slow reconditioning of trades means more kept revenue. Dennis McGinn, founder, and CEO of Rapid Recon, a Vehlo Dealership Division company, says the reconditioning software company has solutions for both challenges.

"This profit per vehicle strategy couldn't have come at a better time," said Jared Ricart, President of the Ricart Automotive Group, whose used car operation sells 600 to 800 used cars monthly, with whom we talked recently.

"All used car managers share a big fear – we don't want to make a mistake," Ricart added. "The used car market is as volatile as ever, and this transparency into profit per vehicle eliminates appraisal guesswork.

Predictable profit per vehicle is defined as zero sales cost due to little or no disparity between estimated and actual reconditioning costs. "When a dealer acquires a vehicle to make a reasonable profit, I assert that their investment must not be 'upside down,'" McGinn said.

"But to get there, appraisals must build from a higher level of vehicle inspection detail than provided by a physical walkaround, a road test, and standard VIN scan tools -- even when conducted by their most seasoned and skilled appraisers," McGinn said.

From my perspective of fixed operations, I would add that accurate appraisals eliminate surprises. Surprises add unnecessary stress to fixed and variable relationships. When an appraiser is confident, they got it right, but should a technician find an issue rooted deep in the vehicle, both parties tend to feel that the other is falling short.”

Rapid Recon and its sister company, Velocity Automotive, released its VINSight predictable profit per vehicle solution at NADA '24. The fully functioning OBD2 diagnostics plug-in also uses Rapid Recon and third-party labor and parts costs to equip appraisers with accurate recon costs for the appraised vehicle.

"Profit per vehicle is about accuracy and saving that one vehicle –we appraised it for this number, we estimated this profit, and can we execute that promptly?" said Matt Hubiak, director of preowned operations for the Swickard Auto Group. The Group operates 50 franchises and 33 rooftops in Alaska, Washington, Oregon, California, and Texas.

Dealers say having better data also helps them develop appraisers' skills.

"The appraisal delta tells me about my appraisers’ skill set," said David Long, executive general manager of Hansel Auto Group, which will retail 10,000 vehicles this year, having served the California Bay area for 62 years. He shares group responsibility with Justin Hansel.

"For instance, if one of my appraisers at a particular store has a steady appraisal delta of $1,800 and another's $800, I want to help that first appraiser estimate his reconditioning costs better. And just by the mere fact that we're measuring it, it'll find improvement.

"If I have 10 appraisers, every one of them will be weighted best to worst on the delta. The more I can find the center here, narrow this gap, and apply vehicle-specific inspection and repair data, the more we should bring that gap together," Long said.

More efficient reconditioning narrows another gap.

"Slow recon, meaning more than five days, erodes sale margin quickly as holding costs on those cars pile up daily until the car is sold," McGinn said. "There should be no room for this needless error in a general manager's diligence."

McGinn has authored four books about revolutionary reconditioning. His fifth, ASPIRE to Predictable, discusses strategic reconditioning time-to-line and its contribution to narrowing trade appraisal variances. It is available at NADA '24, booth 3363W.

Anthony Greenhalgh is VP of Marketing & Sales Operations for Rapid Recon & Velocity Automotive, both driven by Vehlo. He previously was a dealership reconditioning manager.

About Rapid Recon

Reconditioning workflow automation from Rapid Recon is the industry standard in time-to-line inventory turn and speed-to-sale vehicle revenue enhancement for automotive retailers. Benchmarking data based on 13 million vehicles processed uniquely positions Rapid Recon to advise dealers on how to improve their store’s profitability. Used by more than 2,000 dealerships, Rapid Recon ensures the accountability of processes, property, and people. Hence, dealers know answers quickly, find assets anywhere, and sell vehicles promptly to grow dealership profitability. CALL US: +650-999-0497