How To Handle Trade-In Negotiations
Stop Falling Back On Old Business Practices That Frustrate Customers
For a customer that's in the market to buy their next vehicle the prospect of trading in their current car or truck is still a daunting one. All they want is to be treated honestly and transparently while getting a fair price for their trade. Sadly, the prevailing opinion among customers is that instead of treating them fairly, the dealer will play games and take advantage of them. Being the dealer that proves them wrong can be very advantageous indeed; you will close more deals and you will benefit from more referrals.
Today's Customers Are Data Driven
Historically customers haven't been well informed about the values of used cars or local marketplace trends. And while it is unlikely that they have their own VIN scanners and an account with Autoniq or Carbly, these days they can and do turn to KBB or CarGurus for detailed information on used vehicle prices and market trends. So, sticking your head in the sand and playing the same old games while pretending that your customers don't have access to a wealth of data is extremely foolish behavior.
The old way of valuing a customer's trade demands that the vehicle be at the dealership. This has been a preferred method for a couple of reasons:
- The ultimate goal behind any and all lead generation activity is to get the customer into the showroom. Requiring that they come to the dealership for a trade-in appraisal is an easy way to get customers through the door.
- Appraising a trade-in for the sake of buildling a deal demands that the number be correct and we all know that customers conveniently forget about all of the problems their vehicles have when they come to trade them in. Having a vehicle there in person prevents any nasty surprises for the dealer that could force them to revise their offer and risk upsetting the customer.
Times are very different now though. In a day and age when you can achieve most things instantaneously with an app, it doesn't make any sense to apply antiquated methods to your sales process. Customers expect the same immediate service and information from dealers that they can get from other retail transactions. More and more vehicles are being bought and traded without customers ever stepping foot inside dealerships until they take delivery. If you fail to accomodate them in the manner they have now come to expect, another dealer will.
Customers Have Never Been Loyal Anyway
You might think that offering them prices and trade numbers via phone, email or text is a mistake because they will just use that information to broker a better deal elsewhere but that isn't really a valid concern. Assuming that a customer will be loyal to you just because they have been into the dealership is a mistake; no matter how much of a rapport you think you might have established with a customer, they are still going to shop you for the best deal whether they met you in person or not. Ultimately there is no risk to providing figures upfront; you only stand to gain by offering immediate service to the customer.
The Risk Of Appraising Without Seeing A Vehicle In Person
We have already mentioned that customers are conveniently forgettful about problems with their vehicles when seeking a trade number so a lot of dealers are understandably hesitant to offer numbers over the phone based on a customer's description of its condition, in case the vehicle is worth less.
As dealers though, we buy and sell vehicles sight-unseen everyday. With the help of CARFAX® and photos from the customer we can get a fairly good idea of what a vehicle is worth. We are also very familiar with what is required to recon the vehicles we specialize in. When offering trade numbers in advance without having seen a vehicle, you can simply tell a customer that your offer is contingent on the vehicle being as described while mentioning some of the costs you will incur if it needs new tires or brakes, for example. Understanding and accepting that a trade number could change if they misrepresent a vehicle is a responsibility that customers have to assume if they want the convenience and ease of a dealer providing numbers without them being there in person.
Trade Objection; The Customer Always Wants More For Their Trade
However modern your business pratices are you still won't ever escape the fact that a customer always thinks their vehicle is worth more than you are willing to pay for it. While they do have a lot of data at their disposal, they don't understand the finer nuances of the market and they tend to only see what suits them best, which is usually the most expensive comp in the market. They don't know that that particular vehicle is overpriced and has probably been on market well beyond the average market day supply but that doesn't stop them latching onto the number.
This is behavior that a seasoned car dealer knows to expect though and rather than letting it frustrate them, they use it as an opportunity. The fact that customers now have more information at their disposal actaully makes it easier to build a rapport with them and come to an understanding. As long as the number that you are offering for their trade is actually fair, you can use the market data that they arrive with to educate them further. Explain price distribution, market day supply, the turn that your dealership operates on, internal costs like PAC fees and recon, as well as the profit you need to make to exist as a business. A huge portion of their objection to a number that you offer them stems from their lack of understanding as to how you arrived upon it and why it differs from the asking prices they see in the market. Most people are actually quite reasonable and want to do the deal as much as you do. So, if you take the time to explain the process rather than shroud it in secrecy, they are usually inclined to accept an amount that is less than what they originally hoped for.
Competition from other traditional used car dealers was already fierce enough. With players like Carvana moving into the space, things are only going to become more challenging still. Don't make it easy for your competitors by stumbling with customers on something as simple as a trade-in. Give your customers an experience that is simple and pleasant and be the exception to the stereotypical car dealer.