Where the appraisal process is the center of attention

CHARLOTTE, N.C. — Sonic Automotive Inc.'s Retail Trade Center is appraising some 16,000 vehicles a month as it looks to acquire more used-vehicle inventory and provide customers in the stores it serves a quick, attractive and accurate trade-in value.

The laid-back office in Sonic's headquarters, staffed with two dozen people, had a soccer game playing on several large TV screens during a summer visit. The office, serving the nation's fifth largest new-vehicle and sixth largest used-vehicle retailer is the central source of trade-in values for Sonic's 86 franchise and eight EchoPark standalone used-vehicle stores. It also is providing quotes for Sonic's CarCash vehicle appraisal app, now in the pilot stage.

Rob Dempster, director of the center, said his employees provide up to 600 appraisals on a weekday and up to 1,200 on Saturdays.

As appraisals in the queue pop up on screens in the room, staff such as Seth Correll, trade center team leader for Alabama, North Carolina and Florida, grab them and return a value to the store within five minutes, Correll said.

The trade center, part of Sonic for a decade, is an asset to the company and a competitive advantage, Sonic President Jeff Dyke said. He said appraisals across the industry can take 45 minutes, citing his experience in the field.

"I don't know of any competitor that has the level of sophistication and the technology and the experience that we have in our trade center," Dyke said.

The center works in concert with dealership salespeople. The sales staff do a walk-around of the vehicle and, using an iPad or a phone, provide the VIN, year, make, model and other information such as vehicle scratches and condition of the tires, Dempster said.

Sonic has proprietary technology it uses to help make its decisions. It uses information from window stickers, internal sales data and even sites such as Autotrader for market-specific sales listings.

Correll pulls up one appraisal in the queue, a Lexus sedan. "So this one here, they notice a smell from the smoker car, it needs two front tires and they're saying they estimate $1,500 in recon," he said.

Correll plugs the VIN into a system to give him a snapshot. He also has access to wholesale data and to Lexus' website, where he can see what options the vehicle was sold with. He can also see what vehicles have been sent to auction, what's in stock and similar vehicles Sonic has appraised.

The Lexus car is a good one, with good miles, he said, with the only blemish being that it was smoked in. Still, he said, "every car, there's a butt for every seat."

Dempster said each vehicle stands on its own and there's no set discount for a vehicle being smoked in.

"You might on a Lexus like this. It might hurt this car a little more than it does a $10,000 Corolla," Dempster said.

Added Correll, "But not as much as a $70,000 S class."

Within three minutes, Correll declares the car's value at about $18,900.

Dempster said while his team has data to look at and guide decisions, ultimately it's up to his staff to put a number on the car. Customer appraisals at EchoPark stores are good for 14 days or 500 miles, while terms at Sonic stores may vary.

"And the good thing about the office is, there's kind of a wide range of guys in here. Like, we've got guys who are into, like, the tuner import cars," Correll said. "We've got guys who enjoy lifted trucks, modified Jeeps, so we kind of bounce, like, the unique stuff off the room."

How Sonic's auto-retail peers handle trade-in appraisals varies. CarMax Inc., the nation's largest used-vehicle retailer, uses buyers at CarMax stores — coupled with "centralized real-time data, technology and research" — to appraise vehicles, the company said in an emailed statement. CarMax says an appraisal can take as little as 30 minutes in-store; an online appraisal tool is available in some markets. CarMax's written appraisal offers are good for seven days.

AutoNation Inc., the nation's largest new-vehicle retailer, also has a centralized location and system for trade-in appraisals, while others, such as Penske Automotive Group, the nation's second-largest new-vehicle retailer, leave the decision to the store level.

"We could go to a centralized location for the whole country," Penske CEO Roger Penske told Automotive News. "But we think at this point taking that lead into the ZIP code where we have a dealership probably is better for us from the standpoint of getting the business or the appraisal out to the customer and also then being able to facilitate a purchase or a sale transaction."

Penske stores determine what used vehicles to buy, how much they'll pay for a trade-in or outright purchase, plus reconditioning needed, Penske spokesman Anthony Pordon said. They also use tools and technology, such as DealerSocket's RevenueRadar equity-mining tool and vAuto inventory management software to aid in the process, he said.

Larry Dixon, senior director of valuation services for J.D. Power, said Sonic and other large auto retailers are competing with new retail players such as Carvana and Vroom. Carvana also promises an online trade-in quote in two minutes.

Sonic's five-minutes-or-less quote gives the company a significant advantage, especially as studies have indicated consumers want to spend less time in the dealership, Dixon said.

"Reducing the time in dealership is huge," he said. "If you're to quickly come up with a value that is reflective of the market and that you can show to the consumer with confidence, then that transparency also supports that relationship. And the probability that you're actually going to win that deal, right then and there — rather than having the consumer walk out of the door, go to another dealership and then you potentially lose out on that opportunity."

And dealers aren't only looking to score the vehicle sale, Dixon said. "In this hypercompetitive used-vehicle sales environment, dealers need used-vehicle inventory," he added.

Obtaining a vehicle on a trade or buying from a consumer can be less costly for a dealership than an auction because the dealership isn't paying an auction fee or for transportation, Dixon said.

Now, 90 percent of vehicle inventory for Sonic's EchoPark stores is sourced from auctions. But Sonic wants to acquire more through trade-ins, outright purchases and its CarCash app. "We want to trade for as many vehicles as possible because that helps us with our inventory," Dyke said.

On Sonic's second-quarter earnings call Dyke said the retailer also is providing its CarCash app to competitive dealers so the Retail Trade Center can make offers on vehicles those dealers may not want to trade for or plan to send to auction. A pilot for the CarCash app has launched in the area surrounding Sonic's Ford store in Fort Mill, S.C.

"As long as you describe your car right, we'll come get your car and add it into our inventory," Dyke said on the July analysts call.

"So we think it's a great opportunity, a great way for us to buy more cars off the street, not only from consumers, but also from other dealers."