CARPROOF valuation tool set to shake up industry
Hackneyed phrases like game changer and paradigm shift are tossed around an awful lot. Most times, the products or services these clichés are exalting hardly live up to the hype and prove to simply be marketing hullabaloo wrapped round another standard solution.
That truism aside, there is a really good chance Canadian dealers years from now might look back and wonder how they ever appraised and sold used cars without CARPROOF’s Vehicle Valuation Report.
Set for release on April 4, the new solution will be the only product on the market providing dealers actual retail sold data on used cars and not just list price.
“This is such a natural extension for who we are and what we currently do,” explained CARPROOF V-P of dealer sales Chris Afonso.
“Dealers already use our vehicle history report to help buy a car as one portion of their appraisal process. To add these new elements of retail sold data and incorporate previous damage so they have the most accurate numbers go hand-in-hand.”
According to Shawn Vording, director of product management at CARPROOF, the team has been developing this cornerstone of its valuation suite for the better part of three years.
After reaching a critical mass of retail sold data from virtually all available sources, CARPROOF has tested and refined the tool through a nine-month pilot phase.
Stage one was a small beta with a group of about 50 dealers, Vording said, noting they activated another 350 rooftops across the country in January representing a complete cross-section of potential users – franchise and independent, low volume and high.
“We had incredible feedback from dealers,” he said. “We also made a commitment to ourselves that we weren’t going to launch this as a minimally viable product but rather launch it as a great product that offered instant value to the users. We didn’t want dealers to look at it and say, ‘That’s great! What’s next?’ We wanted them to look at it and say ‘This is unbelievable!’ ”
The tool starts with a VIN decode offering year, make, model, trim and the damage amounts from the corresponding vehicle history report. Punch in the odometre and set the comparison parametres – as wide as all of Canada or drilled down to a 100-km radius – and it will produce comparables broken into three sections.
First is the True Retail Sold Value based on actual retail sold prices of all comparables. It will report average odometers, average days to sell and then adjust for odo disparities, damage, projected reconditioning costs and a profit objective to give the True Appraisal Price.
Below the True Retail Sold window is a Listings widget that details average list price from sources online, average days on market and links to existing listings.
Beside that is the Wholesale Sold widget powered by ADESA. It provides a competitive set for wholesale sold prices. Both Listing and Wholesale Sold also detail how many vehicles have reported damage.
The data used to compile all the prices is limited to 90 days, though users can fine tune searches with data from 30, 60 or 90 days.
Vording says all of these vast reams of data sources are updated and cleansed every night so the most accurate numbers greet users every morning.
Scott Greer, director of used vehicles for the Birchwood Automotive Group, was one of the early users. He said it is key the system covers all aspects of used vehicle pricing including data directly from ADESA, current used-car listings and real sold values.
“Since the information from all three sources is available in one place, an immense amount of time is saved researching vehicle prices,” he said.
“No other program I have seen shows how much cars sold for at the auction, what cars are listed for in the market and what customers actually paid for a car. It is simply the most accurate valuation tool in the market, and even further, has the best VIN decode we have ever seen attached to any product.”
THE BACKGROUND
CARPROOF has been publically talking about moving into the valuation game for a few years. It purchased Canadian Red Book in June 2014 and Vording has hinted at the direction during appearances at Auto Remarketing Canada in years past.
During the company’s 2014 client advisory board meeting executives revealed the company was working on a Vehicle Valuation Tool anchored in using actual retail and wholesale transaction data to provide VIN-specific analysis.
Prior to that, he said the strategy evolved out of a desire to increase transparency in the used-car industry for all players. The parallel for this product, however, was borrowed from another industry altogether.
“When people are searching for a house, they don’t care what comparable houses were listed for, they care about what comparable houses sold for.”
Applying that same rationale to the used-car buying experience, the hypothesis was that much like the housing industry, dealers could make better appraisal decisions and set better values with a lot more trust and transparency if they had access to retail sold data.
“Our quest was to figure out how much of that data was accessible and could we build a product to solve that problem,” he said.
Helping prove the theory are the results of a CARPROOF survey of 680 consumers who recently bought a car. Over 70 per cent reported using online listing sites to determine their trade-in value before going to the dealership.
This means consumers are walking into stores assuming their car was worth close to what they had seen it listed for and not factoring in things like negotiation, reconditioning costs, dealer profit and more.
THE NUMBERS
Vording contended that using list prices to set a value on a car is fundamentally flawed.
“We did a study of 2015 cars listed online and found you see the average first price drop on a list between 28 and 32 days. On average, that first price drop is $1,583. From that price drop to the sold price, there is another $1,282 of negotiation,” he explained.
That means that those that adjust their list price would see a $2,865 disparity from first list price to sold price.
“The benefit of knowing what cars actually sell for allows you to set a more aggressive list price, because you paid the right price on a trade in or wholesale. And you don’t have to price drop aggressively because you are already priced right.
“Also, when a dealer drops a price to compete, they don’t know if they are competing against a car with $1,000 damage or branded title. Without knowing your comparable set, you might be dropping your price against a car of different quality.
“This tool allows for way better insight into what a comparable actually is, and what it’s worth and being able to present that with confidence to a consumer in a way that eases tension, seems fair and makes them more willing to transact. It becomes a giant win for everyone including the consumer,” he said.
And it’s not a race to the bottom, Afonso insisted, but rather pricing to what the market will bear.
“That gamesmanship of trying to start high and work low disappears. The other piece from our pilot stores is that with stores knowing average time on lot for a model, dealers might be willing to put more into that car than they are market selling. This tool gives indication of what cars are selling for in the market, how fast the cars are selling and how much you can put in a car and still come out ahead.”
The valuation tool is also helpful for stores appraising cars they don’t see very often.
“Many dealers can be unsure or overly cautious when it comes to valuing off makes because these are not part of their core product line, and they don’t want to make a mistake. CARPROOF’s valuation tool allows them to be more accurate, letting them play offense, not defense,” he said.
ROLLOUT DETAILS
CARPROOF will launch its Vehicle Valuation Tool nationally on April 4. Full details on the rollout will be provided to the industry over the two weeks prior to the launch date.
CARPROOF’s goal is to become the industry standard in valuation. As such, the product will be available in a subscription model and price will not be an objection.
Vording said one of the cornerstones of the system is that it be “ridiculously easy to use.”
While the pilot helped determine the amount and type of training and support needed, he said once users play around with it once or twice they would essentially get the hang of it.
Online instructional videos will be posted at launch and CARPROOF’s existing sales and service team will support the product.
It will be a desktop system at launch but the second generation will have a mobile component.
CARPROOF executives weren’t detailed about upcoming additions to the suite of valuation products, but did reveal there would be more data-driven solutions to come.
“The next iteration of our product family is taking all of this data and applying a sophisticated algorithm to it that doesn’t tell you, for example, what a 2010 Impala is worth, but rather what that specific Impala is worth,” Vording said.
That algorithm is in early testing phase now and would likely be a great plug in to this new valuation tool and will help dealers on generating trade-in apprasials online with a trade in appraisal widget for dealers and consumers.
“CARPROOF is an industry leader in valuation. We are all about transparency and using real data to power real decisions,” Afonso said. “I expect this to be the type of product where dealers will find it difficult to operate without it.”
