New investigation into car buying sites finds 60% of quotes are undercut

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Car buying websites offering a quick and easy way for motorists to offload their unwanted motors are quoting unrealistically high valuations online to attract customers, but then offer significantly less on the actual day of sale, a new investigation has found.

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, according to Motorway.co.uk.

Just 40 per cent of sellers who used one of the online services received the original valuation they were quoted, according to the car buying comparison website.

Price chipping: Motorists looking to sell their cars to specialist buying firms can enter the details and condition of their car online to receive a quote. However, an investigation found that 60% were offered less on the day of sale, with an average of 6% knocked off the price

Price chipping: Motorists looking to sell their cars to specialist buying firms can enter the details and condition of their car online to receive a quote. However, an investigation found that 60% were offered less on the day of sale, with an average of 6% knocked off the price

Price chipping: Motorists looking to sell their cars to specialist buying firms can enter the details and condition of their car online to receive a quote. However, an investigation found that 60% were offered less on the day of sale, with an average of 6% knocked off the price

This isn’t the first time car buying sites have been put under the microscope for unfair practices.

In 2011, the now-defunct Office of Fair Trading found that nearly 96 per cent of customers who sold their car to We Buy Any Car Ltd between 1 July 2009 and 30 June 2010 received less for their vehicle than the original online valuation – a practice that’s now known as price chipping.

Following the appraisal, the Government body said it was operating in breach of certain provisions of the Consumer Protection from Unfair Trading Regulations 2008 and the Unfair Terms in Consumer Contracts Regulations 1999.

But while We Buy Any Car has since improved its practices, especially since being bought by British Car Auctions in 2013, it appears that price chipping is still rife in the market with more firms entering the sector.

The investigations revealed that prices were chipped by six per cent on average.

That works out at £600 on a £10,000 vehicle, for example.

To collate its figures, Motorway 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 six per cent on average, for those below £5,000, the average chip down was as high as 11 per cent.

For cars with a value of £5,000 or less, the price was 'chipped' by up to 11%

For cars with a value of £5,000 or less, the price was 'chipped' by up to 11%

For cars with a value of £5,000 or less, the price was ‘chipped’ by up to 11%

To put this into context, a six per cent 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 per cent 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 per cent.

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.

This can cause huge frustration for the car seller, who may opt out of the deal if they are offered a less attractive fee – though risk wasting their time visiting the seller in the first place. 

Motorway found that sales were much less likely to fall through when buyers originally priced realistically.

In an effort to give consumers a more representative quotation for a car they want to sell, the comparison site has launched its own service called TruePrice that enables sellers to compare likely sale prices for their car, as well as the online offers provided by buyers.

Motorway.co.uk has launched its own TruePrice system that claims to give a more realistic quotation figure

Motorway.co.uk has launched its own TruePrice system that claims to give a more realistic quotation figure

Motorway.co.uk has launched its own TruePrice system that claims to give a more realistic quotation figure

To do this, the 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 these offers, car owners can make a more informed selling decision without fear of being haggled down by a firm when they visit the buyer to sign the vehicle over.

Alex Buttle, director at Motorway, said: ‘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.

‘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.’ 

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