Sky high wholesale prices and the ability to source cars at auctions have been getting most of the attention in the past few months on the top websites and blogs across the automotive industry. And I’ll be completely honest saying that I have had my own struggles dealing with this issue as well. Learning how to get the best competitive set on your appraisals is key to placing the correct value on a car.
The appraisal tools that are available to us like vAuto, First Look and others, are an absolute a waste of money if you don’t learn how to use all of the features that are available. Specifically, in the retail live market view, there are several parameters that you can manipulate to see if items such as Certified or Non-Certified has an effect on the retail pricing. In my experience, checking the Certified box only has a major impact on the pricing when you are dealing with higher priced cars or cars in the Luxury market. The New Luxury market is in a freefall right now, so be very careful when vetting these brands. New Car incentives could increase soon and that makes late model luxury vehicles tougher to value.
So, How do You Get the Best Competitive Set?
I made it a goal this week to make sure I take my time, deep dive into each appraisal, and manipulate the parameters to see if I can arrive at a more competitive appraisal valuation compared to today’s high MMR values. So, here’s what I found.
- Checking the Certified Box increased the retail price by approximately $1200-$1500 on most brands
- In some brands, Certification has no effect regardless of price (This isn’t always true. Make sure you check)
- Color greatly effects specific brands (White/Parch Lexus any Model will bring more money)
- Navigation rarely effects any brand these days(except older models prior to apple car play)
Deep Diving into Options Gives Bad Results
This list can get quite extensive but I think you get the idea. Take the time to toggle these options on and off and discover for yourself which features or colors make a big difference in your vetting of appraisals and auction sourcing. One thing to keep in mind, I mention this in the interview that I did with Mike Cavanaugh, be careful of deep diving too much on your competitive set criteria when pricing cars to market. You can manipulate any car to make it look like you own the car for the right price. All you will be doing is over pricing the car to market and end up with a huge loser when it’s 60 days old.
The One Factor that Gave me The Best Competitive Set Evaluation Difference
I would have never imagined that what I’m about to tell you would have the greatest effect on pricing. I’ve always took for granted that the tool I use calculated the best possible competitive set based on adjusted odometer and like mine options.
When you manipulate the odometer ranges, instead of leaving them blank in the competitive criteria box, you will see a huge evaluation difference in almost every case. Here’s an example of what I’m talking about.
In the above example you can see the odometer is blank as it usually is in the competitive set criteria box when you begin every appraisal and the Market mode is set to recent. On this 2018 Nissan Altima with 57k miles you get an average market profile price of $13,603 and average odometer of 52,436. The competitive set is a total of 158 cars with odometers ranging from 11k miles to 52k miles. Finally reaching a 24 car Market Profile.
Instead of leaving the odometer blank, ad a range of 10k mileage bands and check active to see what kind of difference you may get by excluding extra high mileage cars and ultra-low mileage cars. Surprising enough, when I did this in almost every instance I got a $1500 to 2k bump in retail book evaluation even though the competitive set reduced to 96 cars but the average odometer dropped 4k miles. Finally reaching a 26 car Market Profile. See the pic below.
Taking this exercise into consideration, you might have appraised this car for too low and left a deal on the table. On the other hand, you might think that the additional $1500-2000 bump isn’t worth it and you will own the car way out of market. That’s a decision you will have to make based on your market analysis. But as we all know, trading for cars at the front door is always a better deal than sourcing cars at the auction. If it’s a retail piece, in today’s bipolar used car market you can’t afford to miss any trades.
I’d love to hear your thoughts on this and other ideas you may use in your daily appraisals. Please comment below so see how others are succeeding in navigating this unusual used car market we find ourselves in.