Dealers have been turning to consumer trade-ins as a key source of inventory, so why are trade-ins a pain point for buyers and sellers? On this episode of Inside Automotive, host Jim Fitzpatrick is joined in studio by Micah Tindor, the senior director of Kelley Blue Book Instant Cash Offer, to discuss the dynamics of today’s used car market.
Tindor notes that consumers are facing a whirlwind of economic challenges in the current car market. High-interest rates, high car prices and relatively low tax refunds have increasingly made it more difficult for buyers to afford their vehicle of choice. Millennials and Gen Z have been especially impacted: “If you compare a $48,000 car, which is the average new car price right now, add a 14% interest rate, holding all things steady on rate, term, trade-in and equity, they’re looking probably at $850 fee for a car per month,” explains Tindor. “That’s why…it’s really critical to focus on trade-ins because there’s a struggle to finance those vehicles and their high-interest rates.”
The financial turbulence has caused two shifts in consumer focuses. Today’s consumers are now not only prioritizing the equity value of their trade-in so that they have more funds available for a new car purchase, but they are also searching for cheaper vehicles. Buyers, especially in younger demographics, are searching intensely for options. As Tindor notes, “The average consumer has 2.6 offers on their vehicle when they show up at a dealership; cash offers…If you’re a millenial or Gen Z, 35% of them have four or more offers on their vehicles.”
These priorities mean that trade-in customers want to be more involved in the process. “Consumers now have a vehicle value, but they don’t know how you come to that value,” explains Tindor. “There’s also a lot of pain and concern around how is that vehicle going to be devalued. So they want to understand the process that a dealer is using to appraise a vehicle.” Ultimately, customers are worried that they will not be offered a fair price, and want to see transparency from their retailers. Solving these pain points and addressing the underlying concernes and priorities requires dealers to educate clients. “We found that 60% of the pain points can be solved by helping a consumer feel knowledgeable,” remakrs Tindor. By treating their customers as equals, building up trust and giving them an informative experience, successful dealers make buyers feel at home, regardless of the market environment.
