Vehicle appraisal is the key to your success as an exporter. Accurate appraisal ignites your ability to purchase and stock your vehicles and to capture the attention of buyers, not to mention helping ensure a smooth move of each unit across the Canada-U.S. border.
For many Canadian exporters, the go-to tools for determining the value of their vehicles in the U.S. are the Manheim MMR and guidebooks. These resources provide detailed information on various makes and models of cars, trucks, and SUVs, and offer a range of values based on the condition of the vehicle, mileage, and other factors that can impact its value.
MMR prices, Black Book and Kelley Blue Book are valuable because they show us the current state of the wholesale market. But the question is how representative they are of current, actual sales and whether you should rely solely on them. Let's look at the characteristics of guidebooks and MMR and the various ways they influence appraisals.
Guidebooks and MMR Prices Are Useful…
Using these resources for reference is common and necessary. One example is that, if Kelley Blue Book or J.D. Power (NADA) values for a comparable vehicle are lower than the retail value, nobody will look at the vehicle you’re trying to sell — banks will not fund the purchase and you will be stuck with inventory you can’t sell.
Plus, browsing dozens or hundreds of listings on a classified site such as CarGurus to arrive at your vehicle’s value can quickly give you a headache. That’s where guidebooks and MMR come in handy with values available in one click.
But They Don’t Always Show the Full Picture
Everything looks right about the MMR statistical model — there is a healthy sample size, outliers are removed to make sure that highly customized vehicles, salvage vehicles, or those in poor condition don’t influence the values.
However, one could argue there are cases when the MMR price may not be entirely objective or representative of the vehicle’s real value. This is because MMR values change more frequently than retail and trends can become self-fulfilling. If a seller sees the MMR price drop, they are more likely to let the vehicle go for a lower price so they can get rid of it. This in turn makes the MMR prices drop further, and the story repeats.
MMR Is More Volatile Than Retail
If average MMR values for comparable vehicles go through three update cycles and retail prices only go through one in the same timeframe, this increases your risk of under- or overvaluing the vehicle.
Put it differently, if the price you can sell a vehicle for in retail doesn’t fluctuate widely, then why do we see such large fluctuations with MMR? After all, it’s the retail price that determines if dealers on the U.S. side will be willing to invest in your vehicle. In those cases, as long as you have your target profit margin in place and the vehicle is priced well for your market, we think buying back of retail is a strong strategy.
Influenced By Non-Objective Factors
Even factors like the auction lane and run number can make a vehicle sell for less or more. Placement at an auction is often dependent on the relationships between the auction and the individual dealers. Auctions not only arrange lanes based on those relationships, they also make their money off fees and taxes, which wouldn’t have been included in the calculation. This has a high potential of skewing the values, considering how auction prices make up a large portion of MMR data.
All Sales Are NOT Final
Only reports based on finalized sales give you an accurate idea if a sale at a given price is likely to occur again. However, MMR includes ‘if’ bids in the calculation – which are offers made on vehicles in auction transactions that may not have eventually gone through. Needless to say, those invalid transactions are not nearly as reliable data as actual wholesale values. As a result, the values may skew lower and you could end up underselling just because some of those bids were never going to come true.
Uncertainties In Guidebook Methodologies
Manheim does disclose how MMR values are calculated, but not all guidebooks do.
According to Manheim, guidebooks simply don’t have access to sufficient data on representative transactions and to compensate, they rely on editorial expertise and limited market observations to arrive at prices. This makes room for overly sentiment-driven valuations, which would explain why some guidebook values have historically fluctuated even more than MMR.
We have explored the limitations of relying solely on MMR and guidebook values when appraising vehicles for export. While these resources are useful, it is clear that there is a need for a more comprehensive approach that takes into account additional factors. We understand that this is an ongoing challenge faced by exporters like yourself. Your feedback is crucial in shaping our ongoing efforts to develop an appraisal system that truly serves your needs.
Please feel free to reach out to us to share your thoughts and spark a meaningful discussion. Together, we can work towards a more effective and reliable solution for vehicle appraisal in the export industry.
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