Dealers say mechanical inspections are only completed 59% of the time at auction or trade-in. It’s a slippery slope as tariff tensions rise and parts prices can escalate.
The back-and-forth tariff fight between the U.S. and Canada is creating uncertainty and stress for the automotive industry. Tariffs could impact the price of everything from raw steel to electronic components for vehicles.
According to industry leaders, if tensions continue to rise and further restrictions are put into place, it could be devastating for automakers and the entire industry. As it stands, current tariff rates could increase the cost of new vehicles and parts for repairs.
Dealerships are feeling challenged because there is not clear answer on what could come next. Uncertainty is impacting dealerships’ abilities to conduct strategic planning for inventory, pricing, and more.
But one thing is for certain, the margin for error is shrinking.
Starting January 1, 2027, it is possible that a 50% tariff on all Canadian automotive and steel imports could take effect. If this happens, dealerships will need to control costs and manage how tariffs are impacting their bottom line.
One way this can be done is by knowing more about vehicles before they are purchased at auction or trade-in. As the price of parts goes up, the last thing a dealership needs are higher than expected repair bills that cut into resale profits.
Knowledge is Profits
The equation is simple. Paying less to acquire a vehicle equals more margin for error on repairs and potential for greater profit. But many dealerships are skipping a critical step.
BlueDriver MAX surveyed over 100 dealers around the country to learn more about their vehicle acquisition processes. The majority said that the most important part of an appraisal is the mechanical inspection.
While this is a widely known fact, dealerships also admitted that mechanical inspections are only completely about 59% of the time. Across the industry, dealers said that number is probably even lower. They estimate that only 50% of vehicles are mechanically evaluated across the industry during appraisal.
That is money being left on the table. And as tariffs increase the cost of parts, it’s lost profits.
Tariff-Proof Acquisitions
Dealerships cannot control the cost of parts, but they can control how much they are paying for a vehicle at auction or trade-in. If 50% tariffs go into effect on January 1, dealerships will need to be more rigorous with their acquisition inspections.
Right now, dealerships report they are losing about $4,000 a month on average because of issues that were missed during appraisals. That number can quickly rise as the price of parts goes up.
Mechanical inspections need to be part of every appraisal. Modern, professional scan tools are fast, and they make understanding results easy. A typical scan can be completed in the length of time it takes a used car manager to do a visual inspection.
Instead of a list of DTCs that require a technical background to be interpreted, today’s scan reports summarize flagged issues, assign a risk rating to the vehicle based on findings, and most importantly estimate costs to complete repairs.
Best Practices for Appraisals
Consistency across every appraisal is critical. A standard process should be communicated to every team member involved, and a simple checklist can help ensure steps are not accidentally missed or skipped.
Every appraisal should include five major categories of evaluation:
- Vehicle History Research
- Visual Inspection
- Test Drive
- Mechanical Inspection
- Market Analysis
Skipping one of these steps results in a partial view of the vehicle. A seller looking to trade-in a vehicle might say that the vehicle is driving fine, has never been in accident, or had any issues to their knowledge. But they could have also cleared diagnostic codes that morning to turn off warning lights on the dashboard.
In some cases, dealerships could get lucky and a partially completed appraisal could have no negative outcomes. In others, the result could be a vehicle that needs extensive repairs, and ends up costing the dealership money instead of driving profits.
Controlling Costs Starts with Inspections
If a vehicle is flagged for a major repair issue at inspection, instead of after it has already been purchased, dealerships can better budget for the cost of tariffed parts to fix uncovered issues.
The price of parts is uncontrollable. But overpaying for a vehicle is not.
Managing Director of BlueDriver and BlueDriver MAX, Cole Reiken has more than two decades of leadership across the automotive and technology sectors. He has held senior roles including Vice President of Merchandising & Ecommerce Products at Impel.ai, Director of Product Management at OPENLANE, and Vice President of Digital Strategy at Canadian Black Book.
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