AI increases transparency in used car sales

Customers increasingly expect objective information when buying a car.

Jim O’Brien, Managing Director, Americas at RAVIN.AI, discusses how AI can be used as a tool to increase transparency in used car sales

Consumers have turned the used car market into one of the hottest ever, with prices and sales volumes hitting record highs while new vehicles remain in short supply. But these sales of used vehicles remain difficult and complex for both buyers and dealers. So now is the time for AI technology, widely deployed in other parts of the automotive industry, from manufacturing to marketing to self-driving features, to play a bigger role in making sales more efficient and transparent used car market for both buyers and sellers.

The explosion in used car sales means an explosion of opportunity for dealerships – and the salespeople who sell them. For those who succeed, the rewards are great; the gross margin on a used car is between 12% and 15% of the total price, compared to around 7% for new cars. On the other hand, the risks for resellers are also greater; unlike new cars, used vehicles depreciate at a rapid rate, decreasing in value every day they stay on the lot. Dealerships that sell used vehicles need high-level salespeople to move vehicles – but not all salespeople are up to the challenge, which is considerably more difficult than selling new cars.

While we all know the challenges on the customer side when buying a used vehicle, the transaction is just as difficult for the dealerships. Determining a fair price is complex and time-consuming; sellers need to find a balance between what to charge and what sellers will pay. While most sellers do their best to help customers get the vehicles they need, the process isn’t as efficient as it could – or should – be.

Every vehicle is unique, which means pricing is a fine science, taking into consideration a vehicle’s condition, mileage, equipment and other factors. Another issue for sellers – and customers – is the vehicle grading system. Customers and salespeople often rely on the Autograde score for pricing. Although the rating system is meant to be objective, ratings often depend on the capabilities of the inspector, who pays the inspector (buyer or seller), the inspector’s schedule, and other pressures. Subjective variables in the assignment of condition ratings can cause what many consider to be unfair and incorrect fluctuations in what should be a vehicle’s true and objective price.

Ultimately, there is great uncertainty in vehicle pricing. Car sellers – and their customers – need tools that will enable objective vehicle pricing, based strictly on a vehicle’s objective attributes and market condition.

AI-based tools that collect and analyze vehicle and market data can help ensure this objectivity. Using cameras and sensors, AI-powered tools could automatically provide objective reports of a vehicle’s condition that dealers can use to determine a fair price. By considering factors such as demand, model popularity, cost of spare parts, vehicle age, appearance, and engine performance, AI tools can provide insights that will help dealers obtain an ideal price for each vehicle by scaling it against a set of objective and concrete criteria.

For example, if a vehicle were involved in an accident, its market value would be reduced – and using a variety of input devices, including cameras and sensors, an AI-based system would be able to determine at how badly a vehicle was damaged, what parts – whether on the chassis, in the engine or transmission, or any other part of the vehicle – were replaced, how new or old the replacement parts are, and more Again. With this data, sellers can assess their vehicles more accurately and buyers can be reassured that they are getting complete information about the condition of the vehicle they are considering buying.

Ultimately, a comprehensive condition report, produced with the help of AI, could be produced for each vehicle and track it throughout its life; owners, buyers, and sellers would have access to historical information, and any changes would be noted, creating a truly objective record of the vehicle’s condition and value.

Artificial intelligence tools can help improve the experiences of used car customers, who are increasingly looking for and expecting objective information when making big purchases. These tools can help salespeople work more efficiently, making used car buying more reliable for the mass market — essentially democratizing the car buying process by ensuring it’s fair for everyone. .

Written by Jim O’Brien, Managing Director, Americas at RAVIN.AI


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