Improving the Private Party, Used Car Transaction Process

• Improving the Private Party, Used Car Transaction Process
• Traditional Process
• Traditional Valuation Failures
• Improved Process
• Summarizing the Improved Process

Traditional Process

Traditional Valuation Failures

1. Is the process designed to achieve a competitive advantage in terms of differentiation, response, or low cost?
1. This depends primarily on the seller. If they know what they have is worth more than they’re asking, but would prefer a quicker sale, they could pursue a low-cost advantage by asking a below-market price. Although this could make potential buyers wary that something is wrong with the car but is undisclosed. A seller could also pursue a differentiation model if they have a vehicle unique enough to ask a premium price for such as a classic with extremely low miles and all factory parts. However, the competitive advantages have little to do with the process itself, and more to do with what vehicle is being sold through the process and the price the seller is asking for.
2. Does the process eliminate steps that do not add value?
1. No, in the current process there are many steps that do not add value. The most glaring is the need for the buyer to inspect thoroughly to make sure the seller did not misrepresent the vehicle and the need to possibly negotiate for a long period of time if the buyer feels the price is not a fair value for what is being sold. The need for a buyer to research car values also does not add value but is necessary for the old model if they do not want to be taken advantage of by a more knowledgeable seller.
3. Does the process maximize customer value as perceived by the customer?
1. The process does not add much to customer value, as negotiating private sales can be a hassle. The extent varies on a case-by-case basis, as some buyers and sellers quickly reach an agreement, but others negotiate for long periods of time and require multiple meetups, test drives, and in extreme cases an examination of the vehicle by a mechanic. This wastes both the buyer and seller's time just to ensure that no one is being taken advantage of. If the use of a third-party expert on the condition and value of vehicles was utilized to set a price, it can eliminate many of the steps that add no value to the process and take up a lot of time for both parties.
4. Will the process win orders?
1. This varies case by case. Private sellers asking well over the fair market value of their vehicle will struggle to win orders and maybe for sale for months before finding a buyer. Where on the other hand sellers trying to quickly unload their vehicle by setting their asking price well below market may successfully sell their vehicle within a few days of listing. All private sellers generally must follow this same process, so it primarily comes down to the pricing and condition of the vehicle to decide who wins orders. That being said, if a seller can improve the process, they could gain a competitive advantage over other sellers as many buyers would be interested in bypassing many of the steps that do not add value.

Improved Process

Summarizing the Improved Process

1. The main issues identified in the traditional method of buying a car through a private seller are assessing the condition of the vehicle and pinpointing an accurate price for the vehicle. Because private sellers can represent the condition of the vehicle in the way they choose and set the price based on what they want for the vehicle rather than what’s fair, the current process for buying a car from a third-party seller is problematic for both buyers and sellers.
2. In our modified flowchart, we propose to add a step for the sellers that involves having a neutral third-party uninvolved in the sale evaluating the condition of the car and setting a fair price. By adding this step early in the process, we can eliminate the work of researching car values for the buyers, as well as inspections prior to the purchase of the car. By setting a price based on condition and value before listing the car, the buyers and sellers are also able to eliminate the final negotiation, since the price is already set. This means that when the buyer and seller meet up, the buyer has two choices, to purchase the car or leave and walk away from the sale.
3. This solution is beneficial for both sides because it establishes expectations from the beginning of the process, as well as saves time when there would have otherwise been negotiations. Both sides know what price is being asked, and that the condition and value of the car have been fairly established by a neutral third party making the sale fair for both parties.