Many of the large online marketplaces for vehicle sales have been championing the use of a pricing algorithm to provide “instant offer” prices for those trying to sell their used cars. These had been quite useful for both private sellers trying to get the best deal, and for car dealers trying to use a data-driven approach to pricing cars, instead of the previous valuation process that was just an educated guess.
While these companies still provide these services, there has been a comprehensive but quiet pullback on both how often these are offered, and the relative value of them to the customer. In short, these algorithms are offering valuations on fewer cars, and the value compared to advertised selling prices of similar cars has dropped away significantly.
Car dealers speaking anonymously advised us the wholesalers buying these cars were essentially held hostage by these algorithms, and by saying no to certain cars, they were risking access to the entire system and the good cars that come with it. Eventually the losses on cars started to add up for the wholesalers, and many have started pulling out of the system all together. Without the buy-in of car dealers and the original competition to get access to these cars, these algorithms lose their power quickly.
Many users online on forums like Reddit have noticed a similar trend, where now instead of getting a lower price, they are being advised “no dealers available in your area”, even from capital cities or multiple different locations. Others have advised they are still receiving an instant offer, but many are much lower than even a few months ago.
For customers ordering vehicles that can be months away, some are going through the sticker shock of re-visiting these valuations and finding them far away from the original offers and what they had budgeted for.
As an example, one of our personal customers was originally offered $17’000 for their diesel trade-in when they were originally looking at purchasing a new car. When they ordered a car a few months later, the valuation had fallen to $13’500, and when the new car has arrived it had dropped to $12’500.
Many customers had loved the convenience of these algorithms. They had allowed customers to not feel like they were being taken advantage of without having to get multiple valuations from different dealers. It also stopped them from having to go through the often-painful experience of selling the vehicle themselves or organising a roadworthy certificate. Many of our customers have tried selling their car retail themselves, and after the experience of time-wasters, people offering well under the advertised price, and headaches with mechanics, most walked away with the opinion of “never again”.
So what can customers do in the meantime if these algorithm-based valuations are not what they were hoping for? That’s where car brokers come in. Brokers with many relationships across wholesalers and new-car dealerships can use these along with their industry experience to get many valuations, collate them and come back to you with the best option.
Dealerships are much less likely to ruin a relationship with someone that sources them vehicles by trying to “take advantage” the way that some will with an individual doing a one-off sale.
Thinking about selling your current car, or want to see how we can help with your trade-in on a new vehicle? Contact us today.