How to Calculate Cost-to-Market Appraisals

September 18th, 2018 by
It is important to do cost to market appraisals correctly and thoroughly. There are 2 types of markets that need to be considered when appraising and pricing vehicles as they come into inventory: the general area markets and the dealership specific markets (or internal markets). Types of Markets 1. General area markets tell the dealership how inventory preforms as a whole in the area. 2. Internal markets give the dealership insight on how inventory performs at their location. The two markets need to be used cohesively to get the most accurate read on how to price and select vehicles to take in to inventory. Example Let’s say Toyota Camry does not perform well in the general market and takes 90 days on average to sell. But, for some reason, those same vehicles perform very well at your dealership and only take 10 days on average to sell. You don’t want to lose out on a high performing vehicle. If you only use general market data, it will show that a Camry is not a car that you would want to take into inventory because you would have to price it below market value to move it. But, if dealerships also factor in their specific performance with the Camry, they would see that they actually do well with the vehicle and could make a significant profit. Dealerships that don’t use both general market data and internal market data could be missing opportunities on profit. Why should your dealership do both? When cost to market appraisals are done correctly using both local and internal dealership market data, you not only maximize profit but also build value to the consumer. It prevents pricing low to move inventory. Some vehicles in inventory might not move that well at other dealerships in the area but are strong vehicles at their specific location. Dealerships need to take advantage of their inventory and use their data to hold more profit and build confidence in the sales team on why a vehicle is priced the way that it is. If pricing and appraisals are done correctly using general market data and internal market data, 3rd party pricing proof points will also look better. This ends up making inventory more favorable to potential buyers. With MAXDigital, we look at how vehicles are preforming in your local market and how specific vehicles are performing at your dealership. Our goal is to make sure your dealership appraises and prices inventory to maximize profit. Schedule a demo today.