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Working the spread – that’s how the auto industry is structured to make money, just like any other retail sector. Inventory is purchased at the lowest price possible, reconditioned, then sold for profit. Keeping as much profit in every deal is the name of the game. For auto dealers and auctions, however, used vehicles present a unique challenge: the cos of inventory is constantly in flux.
One of the biggest challenges for the used car industry is purchasing inventory. Year over year, it’s harder for franchised and used car dealers to find inventory at a price that can make them money. And once they find an inventory source – whether a shopper’s trade-in, dealer auctions, or otherwise – margins are thin, leaving very little room for unexpected issues that inevitably come.
For anyone with firsthand knowledge of a dealership’s inner workings, there’s obvious room for improvement with appraisals. Although some dealers have become better equipped to perform trade-in appraisals, the process is relatively predictable for many:
• The salesperson delivers the customer’s keys to the used car manager with a chicken-scratch trade-in form with about half the required information written on it.
• The manager walks around the car looking for dents and scratches, hops in the driver’s seat, checks for warning lights, drives around the block, inspects the tire tread, then heads back to their desk, keys still in hand.
• A Carfax report is pulled, checking for the title status and claims history.
• Then, comparable units that recently went through the auction are pulled up and printed off.
• If the trade needs tires, deduct $1,000. If there’s a Check Engine Light or any other warning light, deduct another $500 or so.
• And if there are previous collisions on file or there’s major damage, play that card too.
But with a majority of car deals happening in evenings and weekends, and with busy service departments during the day, it isn’t often that the undercarriage is inspected well or leaks detected.
What that means for trade-ins is this: top-condition trades are often under-appraised and frustrate the owner while trade-ins in rough shape can be over-valued. In both cases, it can cost the dealership gross profit on deals, if not the deal itself.
At auction, dealers that play both sides – buyer and seller – can experience frustration. Although the valuation process is decidedly more structured than a dealer’s, there are opportunities for the auction to be off-base.
For sellers, a basic physical inspection and checklist is performed, and a vehicle history report is pulled on the unit. But any minor issue can take hundreds off its appraised selling price such as a TPMS light that’s flashing, a poorly-detailed interior, or a flaw on the body that would be a miniscule cost to repair. Those deficiencies are subtracted from the average selling price of similar units, leading to unrealized profits for the seller when it goes through the block.
For buyers, gaps in the inspection process have an opposite effect. Absent a test drive, costly issues with steering and suspension components as well as tires can go unnoticed. Major mechanical issues can pass through undetected, becoming the buyer’s responsibility to either arbitrate or repair. Minor damage can add up – scratches, dents, and rust that aren’t found on the initial appraisal at the auction.
These issues often irritate both buyers and sellers, costing everyone more time and money to resolve, including the auction.
However, automated processes are on the market today that can both streamline the appraisal process and make it much more accurate. Buyers can buy with confidence and sellers can depend on a fair offer that doesn’t depend on guesswork. That automation is available with UVeye.
Visible flaws and defects often slide through the appraisal with the assumption that some wear and tear is normal. However, dealers spend more on reconditioning to repair these issues, cutting into gross profits.
Atlas is a 360-degree inspection platform powered by AI and high-resolution cameras for a complete view around the vehicle. Detecting dents, scratches, color issues, and other flaws down to a fraction of an inch, this tool presents real-time visual data that offers extra data for used car sales managers to appraise a vehicle accurately.
But major costs are lurking somewhere else more often. Dealers can spend hundreds, even thousands of dollars, repairing oil leak, physical damage, or corrosion that normally aren’t seen until a technician lifts it on a hoist – long after the deal is done and the trade-in is finalized.
With Helios, five hi-res cameras take cameras of the vehicle’s undercarriage while it passes over the scanner. It’s non-intrusive and takes almost no time to perform the inspection as part of a thorough appraisal. AI-powered software identifies leaks, abnormalities, and damage within seconds. It serves to reassure the sales manager of a quality trade-in, or it puts bargaining power into the manager’s hands with photos.
Helios is one of the most important tools that can be implemented for vehicle appraisers, whether at the dealership or in an auction setting.
Likewise, Artemis can save dealers money on one of the most costly maintenance items: tires. At an average price of $139 per tire, missing flawed or damaged tires on an appraisal can cost from $500 to $1,000 easily, sometimes more. Hidden behind those tires are issues like steering, suspension, and alignment concerns that also need to be addressed, adding to reconditioning costs.
With Artemis, two cameras check each tire’s sidewall and tread to measure for tread depth, find abnormal wear, and identify pressure issues and leaks. This system can either identify costs the dealer should expect to accrue during reconditioning or affirm the customer’s position that the tires are in great shape.
Whether in an auction setting or at a dealership, an appraisal has significant value. Either it identifies issues that should be accounted for before it’s put on a used car lot, or it confirms with a car’s condition that it’s a good buy. Automating the appraisal process does more, though: it establishes transparency, building trust for everyone involved in the appraisal.