By Cory HewettHead of EnterpriseAppraisalPro
In May, a new record was set—and it wasn’t a good one for auto dealers looking to buy trade-ins: Americans’ cars are old and getting older.
The average age of the 286 million vehicles in operation in the U.S. is now 12.6 years old, according to S&P Global Mobility’s recent headline-making report. In fact, look a little closer, and the numbers might pull you against the screen. Take light trucks out of the equation, and you’ll find the average age of passenger cars on our roads is 14 years old.
And per the same S&P analysts, Americans are holding onto their older cars longer, meaning the mix of older cars on roads is only growing.
If you’re only in the business of repairing cars, this is great.
Trade-in Evaluations
However, if you’re an auto dealer who’s looking to buy trade-ins, this trend presents a double whammy: first, it means fewer people are trading in their cars, so your supply is stagnant, if not shrinking; and secondly--and much more importantly--this trend means you have to more closely scrutinize the vehicles Americans are driving onto your lot.
At the risk of stating the obvious here, as these cars age, the potential for mechanical issues increases, making the used car market riskier for dealers than it already has been.
The traditional methods of evaluating trade-ins—relying on visual inspections, test drives, and a review of maintenance records—are no longer sufficient in an era where a car’s problems might be hidden deep within its electronic systems.
But it’s not all bad news.
Big Data, Big Benefits
This is where big data-driven AI steps in.
New tools leveraging massive datasets and advanced algorithms are transforming the way savvy dealers evaluate trade-ins. They’re leaving nothing to intuition anymore. These technologies use OBD2 diagnostic information–that is, the car’s on-board computer monitoring thousands of systems, modules and sensors–to determine a vehicle’s mechanical condition, necessary repairs and even their costs (that means parts and labor).
And they don’t just identify existing problems; they can also predict future failures based on patterns observed in similar vehicles.
For example, dealership VIN and OBD2 appraisal tools, which literally sits atop millions of vehicle scans, can detect if a car has been shopped at multiple dealerships or if key vehicle data, like mileage or VIN, has been tampered with. This level of scrutiny helps dealers avoid purchasing cars with hidden defects, saving them from potential losses and ensuring that consumers aren’t stuck with a lemon.
Moreover, these AI-powered big data appraisal tools provide detailed repair cost estimates, allowing dealers to make informed decisions about how much to offer for a trade-in.
This most certainly helps dealers win better deals—and put bluntly, not get screwed.
How AI Helps Dealers
But this technology doesn’t just help dealers. In the end, it helps the average person selling their car to dealers and the average consumer buying those used cars.
Here’s how:
Dealers who aren’t using this tech are low-balling customers with trade-ins by $1,000s because they’re assuming something is wrong with the car driven onto their lot. It’s a classic case of information asymmetry; and in the absence of clear information, dealers bid low.
So car owners with perfectly fine vehicles are getting paid less than what the car should be worth. It doesn’t have to be this way, and these new technologies mean it won’t be happening as often. Instead, they can confidently offer a fair price, knowing that any potential problems have been accurately identified and priced.
Data-Driven Decisions
Further, if dealers are buying cars with fewer problems in the first place, they’ll be less likely to pass off their lemons onto unsuspecting used car buyers.
And for dealers who sell more reliable cars, their reputations will rise. In the used car business, reputation is everything.
The implications of these developments are profound–at least for the dealers who are embracing the future today. AI allows dealers to make data-driven decisions with unprecedented accuracy, ensuring that only the best-quality used cars make it onto the lot. This capability not only shields dealers from the financial pitfalls associated with lemons but also builds trust with customers.
Dealers don’t have to turn lemons into lemonade anymore. They never have to buy lemons in the first place.
Cory Hewett is Head of Enterprise at AppraisalPRO, where he arms car dealers with the power of big data to spot lemons, devalue trades and win more deals. As leader of the recently launched division of FIXD Automotive, Cory–an electrical engineer, repeat founder and EV evangelist–directs teams of machine learning experts and certified mechanics, whose proprietary subscription-based appraisal system empowers dealers with immediate, precise repair cost estimates for thousands of mechanical defects, uniquely tailored to the make, model, year, trim and geographic location of used vehicles. In addition to his executive role at Atlanta-based AppraisalPRO, Cory is vice chair at SAE International, focused on early-stage tech startups; and he is founding partner at seed-stage NextGen Venture Partners. Cory has also been pivotal in driving America’s electrification transition, leveraging his academic background in electrical engineering, his expertise in product development and startup environments and his passion for EVs and emerging tech. His thought leadership has generated over 1 million LinkedIn impressions, and his research and articles have been widely recognized in the industry.