An investigation by Motorway.co.uk into online car buying sites reveals price chipping is rife and only 40% of car sellers get the price offered in the initial online valuation.
An in-depth investigation into online used car sales by Motorway.co.ukhas found that some instant car buying websites quote unrealistically high car valuations online to attract customers, but then offer significantly less on the actual day of sale.
This practice, known in the industry as ‘price chipping’, has become so commonplace that six out of ten car sellers received less than their original online valuation on the day of sale. Just 40% of sellers received the original valuation they were quoted.
The investigations revealed that prices were ‘chipped’ by 6% on average – that’s a huge £600 on a £10,000 vehicle.
To collate its figures, Motorway.co.uk, analysed more than 4,000 completed sale transactions through instant online car buyers featured on its website, supplementing this data by surveying customers that sold to other leading car buyers that don’t feature.
Motorway compared the actual sale prices received for each car sold with its original online valuation. It found that while cars valued above £5,000 were chipped down by 6% on average, for those below £5,000, the average ‘chip down’ was as high as 11%.
To put this into context, a 6% chip down on a high-end car valued at £35,000 would mean a £2,000 reduction in the price at the point of sale. On a car valued at £4,550, an 11% reduction would see the valuation reduced by £500 on inspection.
But Motorway’s data showed that not all car buying services take the same approach. Some do offer realistic valuations online, which rarely change by much at all on the day of sale, while others have an average chip down rate of up to 14%.
Why are prices reduced on the day of sale?
Professional car buyers have to make reasonable assumptions on the condition and history of a vehicle in order to generate an instant valuation online, and this is notoriously difficult. If a buyer assumes that a car being valued is in ‘fair-to-good’ condition, they should expect the car to have some wear and tear consistent with its age and mileage and present a valuation that reflects this.
While some changes to online prices are inevitable, some buyers assume all used cars valued are in perfect showroom condition despite their age – and very few are. This leads to significant reductions for typical vehicles when light scratches, dents and other normal wear-and-tear is revealed on the day of sale.
Motorway.co.uk found that sales were much less likely to fall through when buyers priced realistically.
Solving the problem – TruePrice
Launched in 2017, Motorway.co.uk is a price comparison website enabling car sellers to compare offers from leading online car buying websites in order to find their best price. Having completed thousands of successful car sales to its panel of online buyers, Motorway today unveils its own technology called TruePrice that enables sellers to compare actual likely sale prices for their car, as well as the online offers provided by buyers.
With TruePrice, Motorway.co.uk is working to deliver more accurate online valuations and a greater level of price confidence for consumers. It’s an industry first in a sector crying out for transparency.
How does TruePrice™ work?
Motorway.co.uk’s proprietary TruePrice technology uses ‘guide price’ instant valuations from online buyers, and analyses historical sale prices from thousands of similar completed sales in order to calculate what customers are statistically likely to receive for their car in ‘fair-to-good’ condition. Comparing TruePrice offers, car owners can make a more informed selling decision in seconds.
Alex Buttle, director, car buying comparison website Motorway.co.uk comments: “Consumers are increasingly looking to sell their car online to car buying sites because the process is quick, hassle-free and there are some great instant deals to be found. Many sellers simply don’t have time to wait for offers on classified sites or to drive between car dealerships to negotiate a good price. Selling online is the fastest way to get a vehicle sold and it’s why the instant online car buying industry is growing at around 15% a year.
“But speed and convenience should not mean consumers have to accept unnecessary price reductions as part and parcel of selling online. Not all buyers routinely inflate their online valuations, but sadly chipping has become so widespread that many consumers have already accepted it as common practice. Unrealistic online valuations could really damage the reputation of this growing industry if it’s not tackled head-on.
“We felt it was time to introduce smart technology to solve this problem, so we developed TruePrice™ to bring pricing clarity and transparency to motorists across the UK. Car buyers featured on the Motorway.co.uk platform are now actively collaborating with us to instantly provide the most accurate valuations they can for sellers, that reflect the money customers ultimately end up receiving.
“Price transparency has transformed every other e-commerce space, it’s about time the car industry embraced the inevitable transition to a consumer-first, data-led experience. Car sellers deserve to be empowered with technology and should never be treated like ‘valuation victims’.”