McLEAN, Va. -

Earlier this month, NADA Used Car Guide’s Stu Zalud said he and his wife were out to purchase a vehicle and had a trade-in. The price the dealer was offering for the trade was simply on a piece of paper.

“That’s kind of how it’s always been done,” he said. “No real validation, no background, no reasoning behind how they arrived at the number.”

Thing is, when a dealer does that, here’s what tends to happen, Zalud says: the price could very well exactly what the trade-in is worth, but more often than not, the consumer won’t agree to the price, and the dealer has to pump more money into the trade to make the sale happen.

“Let’s just say that it’s $15,000 (that the trade-in is worth) and you have to more money in that car — and maybe $15,000 really is a fair market value for the car, but because the presentation is less than agreeable from the consumer’s standpoint, the number has to go up. And when the number goes up, what happens? Profit opportunity for the dealership declines, because you’re putting more money in a car that might not be worth what it is,” said Zalud, director of dealer services at NADA Used Car Guide.

It’s this type of scenario NADA UCG had in mind with AppraisalPRO, an upgraded product aiming to bring more transparency to the appraisal process and “bridge the gap” between consumers and dealers. After feedback from its own customers and studying research from Deloitte at the Detroit Auto Show, NADA UCG sought to boost the customer experience and transparency in appraisals by optimizing AppraisalPRO for tablets to engage the customer throughout the appraisal process. The tool can also be utilized on mobile phones and desktop computers, and data can be saved from one device to the next (computer, tablet, mobile phone).

AppraisalPRO was also enhanced with a photo upload and damage details sections that allow dealers to better explain and back up deductions they make on a car’s worth. There are also enhanced reporting capabilities for managing appraisals and tracking trade negotiations. The tool also allows for history reports from AutoCheck and Carfax to be integrated.

The enhanced app has been launched with existing customers already; NADA UCG is starting to market it to new customers this month.

The actual product has been on the market for several years, but Zalud explained in more detail why the company decided to enhance it.

“We had a product that was very unique — and still is unique for a lot of reasons — but we listened to what our customers had to say, and obviously the IT world changes constantly, as does software,” said Zalud. “So, about a year ago, we started to embark on a significant investment in time, effort and manpower to make some necessary changes in the design and the functionality of the tool to make it more user-friendly for dealers and even improve on what was already a pretty good product. And we did all this without raising the cost, which is significant.

“But the whole idea is that appraisals have not kept pace, from both a technology standpoint and also an experience standpoint — for the consumer, especially — with the rest of the industry. The buying process has changed; the delivery process has changed; the technology clearly has changed,” he continued. “But most dealers still approach that appraisal in an old-fashioned way.”

However, the customer-involved and explanation-centered approach that AppraisalPRO promotes — all while allowing the dealer to create his own pricing parameters — can lead to three immediate results, Zalud said.

“There is going to be less need to adjust that car to make a deal,” he said. “The consumer is going to be able to get an appraisal quicker. If you look at all the survey information that comes back from the millennials — and those folks are going to comprise over half the market here in another five or six years — they’re looking for speed.

“Everybody’s looking for transparency. It’s evident today that if there is transparency out there, you have to provide it,” Zalud continued. “And then by providing it, with real data and good data … what’s going to happen is, more times than not, the consumer is going to say, ‘Well, yeah, now you’ve shown me how you got there. You started with an NADA trade-in value and you went through all the steps of the condition with me.’”

Zalud personally suggests bringing the customer with you to walk around the vehicle during the appraisal and point out the deficiencies to give the shopper a clearer picture as to why his or her car is worth that amount. If that valuation is supported by data that is shared with the customer, that shopper is much more likely to be satisfied and agree to that amount.

Citing data from industry sources, Zalud notes that about half the time, customers are not satisfied with the appraisal process.  Here’s how that plays out when it comes to numbers.

Let’s say a dealer appraises 100 cars each month. The store would most likely take in around 75 of those cars, he said.

Based on the half-dissatisfaction statistic noted above, around 37 won’t be pleased with whatever number is presented to them at trade-in time, Zalud said.

“And the average adjustment that a dealer makes today if they’re handling non-luxury products is probably $500 every time they have to go back to a desk or back to a tower or back to a manager to get a new number to save a deal,” he said. “And the average times that has to happen in a transaction is probably about one-and-a-half times.

“So that would mean you would be making a $750 addition to the starting number to put your deal together. And if you do it 37 times, that’s $27,000 a month that the dealer is actually losing from his bottom line,” Zalud continued.

He emphasized the tool won’t prevent all customers from being dissatisfied, but it can reduce that number.

“If it’s only 10 percent,” Zalud said, going to the aforementioned $27,000 cost, “10 percent is $2,700.”

And that just adds to the bottom line — money that he contends dealers are otherwise giving up.

“And they’re giving it up because the just don’t have a good process in place to support whatever they believe is the best number for that car,” Zalud said.

DealActivator Adds NADA Used Car Guide Data

In related news, Dominion Dealer Solutions announced that it has added NADA Used Car Guide data to its DealActivator equity mining product

Alan Andreu, general manager of equity solutions for Dominion Dealer Solutions, said: “We’re pleased to offer our dealers a choice for used-car values. With the addition of NADA Used Car Guide data, dealers can choose the guide they prefer. This continues DealActivator’s trend as the leader in automotive equity data mining.”

NADA Used Car Guide chief operating officer and vice president Mike Stanton added: “We worked closely with Alan and his team to meet dealer demand by providing NADA values within DealActivator. We look forward to the continuing expansion of our relationship with Dominion Dealer Solutions.”

Existing DealActivator customers can choose to use NADA Used Car Guide values at no extra charge.