Valuation company Black Book changed its data-sourcing strategies about three years ago, said Rene Abdalah, Black Book’s senior vice president of business development. It previously relied heavily on information from the wholesale market and other direct sources. It still uses that data, but sourcing information on retail transactions has increased in value.
Using enhanced VIN-specific data also has been key in the current marketplace, Abdalah said.
“I wouldn’t say that we have not been outpaced,” he said. “It is more that I feel like we’re in a much better position to react and be able to produce values that are more reflective of the market than we’ve been in the past.”
Black Book has focused on developing predictive vehicle valuation models, though he noted that the disruption caused by the chip shortage has likely hindered the company’s ability to test those capabilities, he said.
The shortage, he said, “was something just not predictable at all.”
Jonathan Banks, general manager of vehicle valuations at J.D. Power, acknowledged that the company’s monthly used-car reports fell behind the rapidly changing market when the coronavirus pandemic began. So J.D. Power initiated a weekly value report in April 2020.
That weekly pace needs to be the industry standard as long as the chip crisis continues, Banks said.
“Historically, the monthly values were just fine. Dealers could use that as a reference point and then, of course, adjust based on how well their dealership does and regional market conditions that they know better than anyone else,” he said. “As a guidebook, [you] don’t even want to pretend like you know more than the dealer [does about an] individual market, because you don’t.”
The inventory crunch is affecting dealerships across the country to varying degrees. In states such as Utah and Texas, customers in certain markets seeking full-size pickups, for example, may “pay more than what we publish because we’re publishing a regional value,” Banks said. “Demand for pickups in your area might be stronger.”
Dealers should still consult valuation guides — but then follow their instincts, Banks said.
“You’re going to know what you can sell it for,” he said. “You’re not going to have that problem with your inventory getting stale.”
