Best Practices and Tips

TradePending’s Valuation Methodology

The philosophy behind TradePending’s valuation methodology began at the same time of the company’s founding in 2014. 

Brice Englert, CEO of TradePending, understood how important sourcing cars from the general public was for dealers. He also saw a huge disconnect between how dealers valued cars versus how people were valuing their cars. 

Here’s the Problem

TradePending valuation methodology

Dealers no longer used “book values” in 2014. Frankly, these values may have never been used by the experienced dealer or used car manager.  Instead they used as much data as they could gather about their local market sales. Consumers, unfortunately, were still using “book values” because that’s all that existed online at the time. They walked in expecting one value, only to learn that wasn’t the real value. Now the consumer distrusted the dealer’s number, rather than book value from the companies giving them questionable data in the first place.

How Every Other Market Assigns Values

Do realtors and appraisers consult books to value your home? Do they look at prices that the builders paid to build your place in order to value your home? Do they look at homes for sale in Dallas if your home is for sale in Austin?  

To value homes like this would be absurd. Realtors and appraisers look at comparable houses recently sold, in your local market, and what they’re selling for in the immediate past. 

This same approach is followed by every other industry, except for automotive, until TradePending brought a hyper-local and  “retail down” approach to valuing vehicles.

TradePending’s Valuation Methodology

We value cars based upon the following approach, while also enabling dealers to adjust their offers as dictated by the market or their strategy.

Here’s how we arrive at our valuations:

  • We look at local market data. We’re still the only vehicle valuation methodology that starts by looking at comparable vehicles for sale as close to the dealer’s location as possible. We start with a radius of 25 miles and move out from there until we find enough vehicles to deliver a value within a range of confidence.
  • We measure retail “ask” prices, not wholesale values, not book values, and we don’t use hidden calculations to arrive at the value.
  • We only look at franchise dealerships. We do not look at third parties, no big box retailers, no Facebook marketplace, no independent dealerships. This gives us the highest likelihood of presenting a value that represents reality for our customers by comparing truly front-line ready and professionally retailed units.
  • We update the values daily. This has proven critical as values have been on a wild ride the past few years.
  • We provide estimated costs to recondition the vehicle and make it front-line ready, based upon NADA data where available, amongst other proprietary industry research.

Here’s how dealers can configure their TradePending trade-in values so that the values match their local market conditions, sales approach, and vehicle acquisition strategy: 

  • Controlling the width or narrowness of the trade-in range. If a vehicle is worth $10,000, do you want your low-end to be $9,200 or $9,500 or something else? Should the high-end be $10,200 or $10,500 or a different number? We give our customers that control.
  • Adjusting your reconditioning fees based upon the type of vehicle, your actual overhead costs, or other factors. 
  • Configuring both the questions you ask and the resulting deductions when arriving at a single price offer.

Why Valuing Vehicles With Real-Time, Local Market Data Matters

As we’ve seen the past few years, vehicle values can vary widely by day and by location. 

A quick survey on LinkedIn confirms what we’re already seeing in our data: vehicles are depreciating in value again, instead of appreciating. 

If your trade-in tool is not immediately keeping pace with these changes in your local market, you’re going to have a lot of upset customers. They’ll be expecting more for their cars than you’re able to pay, which is not a great conversation to begin your sales process with. 

This is what makes the right vehicle valuation methodology, one that uses real-time and local market data, so important to the customer journey, and ultimately your closing percentage.