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5 Essential Reasons for Securing Customers' Trade-In Vehicles

A key part of the deal process is the value given to the customer's trade-in vehicle. If we look beneath the surface of car trades, we can see the benefits of making the vehicle trade-in valuation as transparent as possible.

Why secure a customer's trade-in vehicle?

• Inventory Acquisition. A car dealership depends on its inventory, both new and pre-owned. A customer's trade-in provides an opportunity to obtain a local vehicle, maybe even with a known service history, for the Used department inventory. Developing a steady flow of quality, pre-owned vehicles into the dealership's inventory enables the dealer to obtain models that may be popular in the local market and bypass the wholesale auction process. Establishing a transparent appraisal policy ensures fair valuations for quality, local vehicles allowing dealers to earn a significant gross profit when retailing out of most trade-ins.
• Simplified, One-Stop Solution. Having customer trade-ins as part of a deal offers a simplified, one-stop solution for customers. Customers don’t have the hassle of finding an individual buyer for their old vehicle, and in some areas a discount on the sales tax charged to their next vehicle. A survey conducted by Autotrader, a full 60% of consumers say they would be more likely to buy from a dealership that offers a guaranteed trade-in price. This shows how an easy to understand, transparent trade evaluation policy can boost customer satisfaction and build long-term customer loyalty.
• Increased Vehicle Sales. Dealerships operating a transparent trade evaluation policy usually have the upper hand on the competition. The complexity and time-consuming nature of private vehicle sales means a large pool of customers prefers trading in their used vehicle while purchasing their next one. By offering an appealing trade-in value, dealerships can attract more customers and create additional vehicle sales.
• Increased Gross Profit. Securing a trade-in can also create higher gross profit for the dealership. On the surface, the dealer is giving the customer fair-market value for their trade. However, the dealership has a good chance the reconditioning cost is within the established average Per Used Vehicle Retailed (PUVR) so the trade can be retailed at a higher price, increasing gross PUVR. The customer benefits from a hassle-free means of disposing of their old vehicle while saving money on their next purchase.
• Offers Customers More Choices. If the customer's trade-in has a higher allowance than expected, the customer may decide to add accessories to their next purchase, or move up to a model with a higher trim level. The customer may also opt for a lower monthly payment as a result. Either way, the customer has more choices in making the deal to their liking and needs.

Final Thoughts

In conclusion, the important role a customer's trade-in has when making a car deal cannot be overstated. It's a powerful tool to increase customer satisfaction, boosts profitability, and provides a dealership with a competitive edge. By providing each customer having a trade-in vehicle with an easy-to-understand and transparent appraisal and valuation process is a great method for a car dealership to ensure it remains sustainable and profitable in the highly competitive automotive retail market.

Author - D.G. Berlie

D.G. Berlie has over forty years of experience in automotive business management consulting and associate and executive coaching.