April 16, 2020

The Importance of Trade-in Valuation Methodologies

Recent shocks to the automotive market driven by COVID-19 surfaced significant challenges for dealerships to value cars. Those that rely upon digital retailing solutions have immediately raised concerns of book values. Market information has also surfaced that guaranteed offer programs for trades are no longer going to be backed by the guarantor.

We designed TradePending’s valuation methodology to be resilient during turbulent markets, and times like these are quickly proving why. Here’s how and why our approach stands up.

Reason #1 – Local market values differ under normal circumstances but vary greatly during turbulent times. As a dealer, consumer or technology provider using trade-in values to determine potential deal structure, “equity” calculations, or to “buy a car online”, you can’t rely on undisclosed regions of data.

TradePending has been and continues to be the only solution that is based on as tight a radius as possible from a specific zip code.

Reason #2 – Wholesale markets are currently irrelevant. They have routinely proven that they don’t move in parallel to local retail pricing movements. With negligible demand for wholesale inventory, front-line reconditioned inventory is the best basis to understand the retail pricing market. What traded 30 days ago in a wholesale market that doesn’t exist today, well, that just doesn’t matter.

TradePending is the only valuation solution that measures local retail “ask prices”. Our methodology adjusts value based upon a proprietary matrix of reduction calculations, as well as retail supply and demand forces. Most importantly, TradePending updates these values daily to stay in-tune with the market.

Reason #3 – A range-based solution with additional data points and transparency will always prevail vs. hiding the calculation and other basis for value. No other asset that is traded from buyer to seller is based on hidden calculations; they are all based on “comparables”. Whether stocks, houses, steaks, or commodities, we all rely upon comparative information to make good buying or selling decisions.

TradePending is the only valuation solution that shows other cars in a local market and how a potential trade compares within that market.

With daily updates, TradePending creates the right environment to lead a discussion and then arrive at an appropriate trade-in value, based on a final inspection and buyer-based variables, all of which will differ by dealer. Providing a trade-in range, which highlights local market comparables, allows dealers the flexibility they need to quickly adapt. A non-guaranteed singular number will only frustrate both buyer and seller, resulting in lost trust and sales.

For our peers that provide digital retailing solutions that need better trade-in values, the SNAP API will immediately solve your challenges. Contact sales@tradepending.com or use the chat tool here on our site to get started.

For dealers that use digital retailing and trade-in solutions, there’s never been a better time to evaluate our SNAP trade-in tool, and to push your digital retailing solutions to utilize the SNAP API. Email us at sales@tradepending.com or chat with us here to schedule a call.

For consumers, use caution when receiving “guaranteed” offers for your vehicle. Make sure to request local market comparables for your trade-in to ensure you’re getting the best offer.