How to Overcome Challenges with Vehicle Valuation
- Tips on how to stay connected to car buyers virtually.
- Best practices for valuing vehicles during this unprecedented time.
In this episode of Reynolds’ new video podcast, Connected, we discuss how used vehicle valuation is being affected by the sudden shift in transactional data, and what your dealership can do to adjust.
Greg Uland: Hello, I’m Greg Uland, marketing director at Reynolds and Reynolds, and this is Connected, the podcast with best practices and ideas to help navigate what is going on in the automotive retail industry and the world today. As the COVID-19 virus continues to change our world and how we live and work daily, this podcast discusses ways to continue operating in this unprecedented social environment. On today’s episode, we have with us Jeff Risner, CEO at The Appraisal Lane. Jeff, thanks for joining.
Jeff Risner: Greg, thanks for having me.
GU: Of course. Glad you could make some time. Jeff, you and I have talked a lot in the past, but for the audience, could you give a little background on yourself and then also what The Appraisal Lane does?
JR: I’ve been in the car business for approaching 40 years, which just basically means I’m old. I started out in the wholesale space at family owned auctions. Was fortunate enough to be recruited by Circuit City and was a founding associate of CarMax back in 1993. And that really kind of charted my course. I love structure, I love process, and I love making data driven decisions and that’s kind of affected my career moves going forward. Spent some time at Lithia Motors as vice president of new and used vehicles. At the time we had 112 rooftops across 15 states. So I got a taste for scale and scope and working across markets. Also had a stint where I was a co-owner of an independent auction in Georgia for about 15 years, and now I am a co-founder and the CEO of The Appraisal Lane.
The Appraisal Lane is a kind of mobile-based community, kind of like a live trade desk where it’s connecting consumers with dealers, and dealers and consumers with a live marketplace. And dealers can use it to either value trades prior to taking them in, liquidate inventory that’s in stock, or source inventory from other dealers or consumers in that space.
GU: Thank you. So with that background, I obviously want to talk with you about the appraisal process today. Clearly, the appraisal is still a huge part of every retail deal, but it’s really difficult to manage a process in today’s world that’s safe and keeps both employees and customers comfortable. So what are you seeing changing in the appraisal process right now?
JR: You know, I think as an industry, our biggest challenge around trades is how can you migrate best practices and what you’ve executed for the previous few decades, and going through physically at the brick and mortar locations, how can you migrate that upstream? How can you do that remotely and still have an engaged, connected process that helps educate the consumer not only on the number, but how you got to the number, and make them feel comfortable with it and allow them to move forward with you towards a transaction. So, social distancing has made that more important than ever. There is no other way to interact with them right now except remotely. We’ve been touching consumers for almost a year and it’s just more relevant now. So we’re getting a lot of traction in that space and a lot of experience.
GU: Yeah, makes a lot of sense. So, Jeff I’m curious too, being in the space you’re in specifically, it’s interesting. So with the future so uncertain, we don’t know how long this is going to last or what it’s going to look like on the other side when we come out of it. How are you at The Appraisal Lane treating valuations? And I guess secondarily, or maybe primarily, how much risk can dealers take right now when they’re taking in a car?
JR: You know what I would say there is, there are several baseline metrics that most institutions or large sellers use as a retention baseline in the marketplace. And they’re based on algorithms and they’re based on transactions. So when you see a mass reduction in transactions and a backlog of inventory standing, it makes the numbers, I won’t say less relevant, but less current, because you’re looking at, “I’m retaining 91.5% of x”. Whether it’s MMR or Black Book or KBB, whatever the number is that you’re using, that’s not a static number. And you can’t say that our market has plateaued or leveled off. You have to look at the trend line. So it’s not just that one data point. It’s the data point from the three previous periods. And what’s the trajectory? And you have to get ahead of that, because when you’re connecting with somebody remotely, you don’t know if you’re going to transact today or next week. And in the volatile market that we’re in right now, that could be meaningful. Next week could really hurt if you’re betting in today’s dollars. So I would just caution dealers that it’s hard to make data driven decisions because right now so having real people and having those insights that come from you is more meaningful now than it ever has been. So at The Appraisal Lane in particular, we’re baselining and adjusting our valuation methodology twice a day. So we look at the previous day’s activity, not only in our space and the interactions and feedback that we’re getting from dealers, but we’re touching base with most of the major data providers, and we’re also monitoring any online static postcard sales or monitoring about seven or eight a day in different regions across different sets of transactions. And we’re not just looking at the transactions, we’re looking what was offered, what the bidding pressure or lack thereof was, and we’re kind of using those observations to create insights and infer and adjust our methodology. Here, again, twice a day, because it’s changing that fast.
GU: That’s a good point. And thinking about it, doing it twice a day, doing it really, really frequently, you almost have to. And dealers really do, too, right? Because the situation four hours ago, to your point, isn’t the same as what it is probably right now.
JR: Yeah, when you get up at eight o’clock in the morning and you’re thinking about what a car was worth when you were working a customer at 5:00 yesterday and at 11 o’clock, five sales have gone off, you have a different perspective and you need to adjust accordingly.
GU: . Well, Jeff, I definitely appreciate you taking a couple of minutes out of your day to chat. Before we hop off and while we have the audience here, is there anything else that you want to touch on or anything you want to say?
JR: In the opening I talked about, we have a community-based product and we’re a community. And so we spend a lot of time connecting with all the members in our community, both buyers and sellers talking about best practices. And, you know, we’re seeing a lot of dealers leverage our consumer connectivity to setup and schedule one-on-one deliveries and pickups to transact with customers. And they’re following simple procedures like wiping down the steering wheel, wiping down the handles on the car. You know, we’re not in the medical profession. We’re in the automotive profession, but we’re trying to do the best we can with the new criteria and the new normal that we’re operating in.
GU: Good. Thank you for sharing that. Again, Jeff, I definitely do appreciate you taking a few minutes. I know you’re busy, so thank you.
JR: Thank you, Greg. I appreciate the opportunity.
GU: Absolutely. This has been Connected. Stay safe and we’ll see you on the next episode.
Continue to tune in often to see new episodes with best practices and tips for navigating the automotive industry during this unprecedented time.