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Tuesday
Feb022016

Dynamic Pricing

Remember from way back in the day when new vehicles had a suggested retail price (MSRP) and knowing the dealer cost (invoice) was all the rage. At another time folks discovered "holdback" as an additional negotiating tool.

 

They were also the days when the "spread" between dealer cost and retail price was approximately 15%, now in many instances its less than 10% and shrinking.

Recently the auto business thrives on dynamic pricing, the retail price is a constant, but the retail incentive, program, subsidy varies on a monthly basis. Additional incentives to the dealer also vary on a monthly basis.

From a consumer's perspective, that you know the cost, the various programs, there are still a few pieces of the puzzle that are missing. That you configure a new vehicle online, that you can calculate the value of your trade in online provides an idea of the parameters of the deal.

There is a ton of big data that is available to manufacturers to calibrate monthly dynamic pricing for the various models. There is another ton of big data that is available to dealers to see which customers are more responsive than others to a precise dynamic pricing moment for a specific model.

Since the auto industry must move metal to thrive, there are additional call them "back room" incentives, considerations between manufacturers and dealers to move metal and achieve objectives.

You are an empowered consumer, interfacing with monthly dynamic pricing to close a deal in a showroom. Reflect on this for a moment...now factor in a trade in, and how do you close a deal?

As consumers we all know that be it at the grocery store, buying a plane ticket, with dynamic pricing timing is of the essence, and you will often save here and drop some money elsewhere. The cheap flight is the one leaving at 5:48 AM as an example, and 3 days later its no longer a cheap flight.

From a consumer's perspective...

Informed / Empowered

As a consumer I am informed and empowered having done my due diligence to find metal that resonates, I have an idea of the price within the time frame (month). Obvious also have a good idea of the value of my trade in.

Price / Payment Point

With incentives swirling around on a monthly basis, I have a price point or monthly payment point where I will make a decision to close a deal.

Big Data

As a consumer I'm at a distinct disadvantage to access "big data", I can access information, values, what is offered in the market to name a few. The information I access is slow compared to the big data of manufacturers and dealers.

Timing

Manufacturers offer monthly incentives which are published and static for the month, although they are adjusted for various regions of Canada. Monthly sales are reviewed on a 10 day basis (decades). As a consumer the last 10 days of the month are more auspicious to do an additionally favourable deal, since there might be additional "back room" incentives motivating the dealer.

Agreed...CMS (Citizen Main Street) already knows that doing a deal towards the end of the month has its advantages.

Humans

Keep in mind we are all humans, and spending big money will always involve emotions, and a gut feel. Especially once the metal resonates.

 

Tuesday
Jan262016

Do You Have Equity or Cash or Both?

We constantly hear all sorts of comments from a myriad of experts, pundits, analysts on how to buy a vehicle.

As much as Canada is a country of natural resources, we have lately morphed into a nation of borrowers. Agreed...serious borrowers.

The comments always focus on the programs, incentives, are they stackable. It always looks as if somebody is almost giving away cars for free.

Even with a ton of financial services that are available you still need money/cash/equity to close an advantageous deal when acquiring any vehicle. You know the saying "Money talks and everything else walks".

Let's take a look...

Buyer:

Expects the dealer to be in a position to have money to pay for the trade in.

The dealer expects the buyer to have equity in the trade in.

Seller:

Expects the buyer to be in a financial position to close a deal.

The customer expects the dealer to provide financial services to close a deal.

We can conclude that it takes cash, equity, financial services in any combination to close any deal.

Imagine a dealer that would say "Come back in a few days, don't have any money today to buy your trade in".

Imagine a customer that would say "Oops did not expect to have that level of negative equity in the trade in".

Good Idea:

To know precisely what your equity or cash position is prior to initiating any transaction. The financial incentives offered by manufacturers do not replace equity or cash. As well the incentives predicate an equity or cash position.

When the equity or cash position is precarious, the deal migrates to "high finance" and suddenly its not such a good deal anymore, or simply not "doable".

Reflect on the following...

There were 1.9 M new vehicle sold in Canada in 2015 of which 57% were financed in round numbers 1 Million vehicles were financed with 70% / 700,000 financed for a term of 72 months or greater.

How much negative equity from the trade in was rolled over?

While the auto business functions best on a 36 month cycle.

 

 

Tuesday
Jan192016

You Have A Trade In...

Who doesn't have a trade in?


How many trade ins have negative equity?

The classic sell it yourself, to get more money.

The ongoing conversations around trade ins are antiquated, stale, and a different version of the same old.

In 2016 empowered by technology do you want to be part of the "haves" with the same old stories, perspectives. Or do you want to be part of the "have mores" by being innovative and disruptive?

The "Haves"

I'll get low balled by the dealer, who is an expert negotiator they earn a living negotiating. I'll try to sell it myself, how challenging can it be to sell a 15 to 20K vehicle out of my driveway? Dealers do it every day.

We could keep on going, surely by now you know the story of the "haves".

The "Have Mores"

I need to maximise the value of my vehicle. I need to sell my vehicle to a dealer. I know what my vehicle is worth. I will clean my vehicle or have it detailed...we all buy with our eyes. I will have my own Carproof report for my vehicle. If my vehicle is financed or leased I will know my payout. I will know if I am in a positive or negative equity position.

Sell it yourself from your driveway

If its a 1K to 5K vehicle its somewhat easier, if its a 15K to 20K vehicle its dramatically more challenging to sell it from your driveway, while providing financial services to fund the sale.

I want the most money for my trade in

Everybody wants the most money, in a wishing and hoping way. You did your due diligence, your vehicle is clean inside and out, you have a Carproof to support the "provenance" of your vehicle. You know the pay out if its applicable. In your mind you have a "value point" for your vehicle that will trigger a decision.

You have a story line to describe why your vehicle is unique, why its worth more money.

The dealer is a magician with trade ins

Remember the dealer needs to take a trade in to close a deal. Especially around the end of the month there is heightened pressure on the dealer, and sales consultants to close additional deals. Does the vehicle you are trading present a retail profit opportunity to the dealer? Be aware that his software already told him if your vehicle today is a retail opportunity, or a wholesale unit.

The dealer is not a magician, he is as vulnerable as you are with trade ins.

 

 

 

Tuesday
Jan122016

Time To Replace Your Vehicle

At a certain point we all need to replace our current vehicle for one reason or another. Lets leave the reasons aside. So the time has come to replace the vehicle.

In our case a few months back we had to replace a vehicle on a tight schedule to make it even more interesting.

Follow you heart and emotions

You need to be satisfied with the vehicle you choose, which involves emotions, and it has to feel good.

Be attentive to your budget

We all have a budget for a vehicle, be it a price, a monthy payment, a lease payment. Ensure that the vehicle is within the level of comfort of your budget.

It must fit

It could be any vehicle, but it has to fit your lifestyle, your family, your usage, the drivers. It could be a sedan, utility, pick up, sports car...or anything else. Make sure it fits.

Your due diligence

Empowered by technology, its easy, comfortable, productive, effortless to do your due diligence, and refine your choices. Simply visit the manufacturer sites that are of interest to you. You can configure, calculate a payment, a lease, a trade in value. Visit the sites of the local dealers too.

How many choices do you need?

Its up to you, ideally the less the better. One or 2 choices is usually enough.

The metal must resonate

You saw a ton of photos and videos. If its a new vehicle or even used go walk in a dealers lot to make sure the metal resonates with you and whoever else is involved in the decision process. Often what is appealing on a screen, does not resonate in metal.

 

 

Tuesday
Jan052016

What Is My Car Worth? 

 

The enduring question "What is my car or truck or utility vehicle worth?"

At a time when the "consumer" is fully empowered with incredible amounts of information, the question still arises.

Whatever your vehicle, it has a value, and wether trading it in, or selling it yourself. You need to be in a position to know its value prior to selling your vehicle...yes SELL.

Points to consider.

Would you buy your own vehicle?

How interested would you be in buying your own vehicle? Very interested or not so much? How interested would an individual off the street be?

What does your vehicle need?

A good detailing...they all do. Tires, dings, scratches, tear in a bumper cover, a dent, the brake pedal is low are a few examples. Establish a reasonable list of what you would do to your vehicle if you bought it yourself. As for the cost, its easy to arrive at an estimate, being aware that labor rates are at least $100 per hour.

Accident?

Has your vehicle been accidented? Its a good idea to generate your own Carproof report for your vehicle. Keep in mind that any accident appearing on a Carproof is a blemish on the "provenance" of your vehicle. Its an additional variable that must be declared and explained to a propective buyer.

Accident - Frame Damage?

All modern vehicles have "crush zones" to keep passengers safe, substantial dammage on any vehicle will make its way to the crush zones and frame damage. "It was a $10,000 repair but no frame dammage" is the common snippet.

Kilometers Travelled

The rule of thumb is 20,000 kilometers per year. Higher will decrease the value, lower will enhance the value. In some cases higher will make the vehicle unappealing, even with an adjusted price.

Competition

Technology has increased the level of competition, and choice. You have what is touted as a popular model by the automotive media, its only 3 years old. Be assured there are a ton of similar vehicles already in the market competing with yours.

Market Price

Competition generates "market pricing" which tends to be on the lower end of the scale to attract a prospective buyer. Especially for models with good availability in the market.

Time

How long should it take to sell the vehicle? The sooner the better, less than 30 days.

What is the value?

Go to Canadian Black Book to have a wholesale/trade in value as well as a retail value. Do keep in mind that the Black Book has never purchased a vehicle. Vehicles are transacted in the rough and average columns. Go to Auto Trader for your area to have an idea of asking prices, which are not actual selling prices. Yes...you can Google the year, make and model of your vehicle too.

Its complicated?

Its easy, requires minimum time. As an informed / empowered consumer, be aware that most dealers in 2016 use powerful, sophisticated software to access a myriad of "used vehicle data" to empower their decisions and selling process.

By inputting the VIN of your vehicle, the dealer will instantly know the average market price, the competition in the market, how the vehicle is selling, and numerous additional data points.

How does it work?

From the Black Book you find a trade in value of 15,000  and you conclude that the retail market price is 17,995. From Auto Trader you notice that the retail market price is closer to 17,495 and there are a good number of similar, popular models like yours in the market.

You know that your vehicle needs a brake job, tires are 60% worn, probably needs an oil change, the air filter is tired, as well as the cabin filter. If you would buy your own vehicle you would like to see new pads all around, perhaps even new discs, new tires, and an oil change. Agreed the vehicle will pass safety with hardly any material left on the pads, discs that pulsate, almost worn out tires.

Lets say that you would need to invest $1,500 in reconditioning.

Trade In / Wholesale Value (not always the same).......15,000.

Reconditioning .........................................................(1,500.)

Net Value Wholesale..................................................13,500.

 

 

Monday
Jan042016

Tip Of The Day

 

Its 2016 we have a new section in our publication..... "Tip Of The Day".

What is it?

A collection of tips, advice, strategies on timely "automotive" issues that will assist you in being more competitive, achieving better results, saving money, or getting more money.

Will it be daily?

Perhaps not daily, but often enough to uphold momentum.

Why are we doing this?

Its our 10th anniversary of publishing Strada, we want to offer advice, assistance, guidance, as a form of giving back.

Do we expect something in return?

Yes...join in the conversation, and tell your friends.

When does it start?

Tomorrow

 

 

 

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