As used-car inventory levels stay constrained below historical norms, sourcing profitable used cars is continuing to be one of the toughest operational challenges for franchise dealers.
And on top of that, CarMax $KMX ( ▼ 2.44% ) and Carvana $CVNA ( ▲ 4.77% ) are gobbling up more lucrative inventory than ever before. The companies are on track to source roughly 2 million vehicles from consumers this year, out of 15 million total available in the market, according to Brian Kramer, executive vice president at Cars Commerce.
How? They're capturing that volume because they complete online trade appraisals at scale. When a customer requests a trade-in value, they get an instant number. Simple as that.
But many franchise dealers don’t offer or can’t complete online appraisals.
“Say you've got the client at the bottom of the funnel. There's two things that are the highest intent, credit app, trade appraisal. And if you let them bounce and you don't answer their question, they're going to one of your competitors who's going to do it,” Kramer told Daily Dealer Live hosts Sam D’Arc and Uli de’ Martino.
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The roadblocks: Kramer asks about online appraisal completion in every 20 Group he visits. And there are three answers come up consistently:
"I don't want to leave any money on the table." Dealers want customers in-store to evaluate profit opportunities before committing to a number.
"Customers aren't going to tell us the truth." Dealers assume customers won't disclose every scratch, dent, or condition issue when filling out online forms.
"I'm not confident in the value." Outliers, current model year vehicles, or anything outside the dealer's typical inventory creates hesitation about putting a number on the car.
Here’s the thing: Customers aren't disclosing every issue to Carvana or CarMax either. But the companies factor that risk into their process and source the cars anyway. Dealers won't, so they lose the acquisition opportunity.
Bottom line: The longer dealers cling to in-store-only appraisals (or let doubt and risk aversion impede them), the more they miss out on the most profitable cars and watch competitors scoop up the best inventory.
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