For those of you who have ever tried to research average close rates for automotive leads, we feel your pain. It's tough.
The percentages run the gamut and depend on a variety of factors, including lead source (3rd party, OEM, dealer website), lead mix (the percentage of leads that came from particular sources), lead type (new/used), and the myriad factors that define 'bad leads.'
Every dealership is different with processes that can vary widely from store to store, which makes it even tougher to nail down industry benchmarks. The way dealers advertise, as well as the way they respond to, purchase, and convert leads from website to showroom visits all have a bearing on close rates.
In our research, we found average benchmarks of 8 – 10% for third party leads, 10 – 15% for OEM leads, and 15% - 20% for dealer website leads. We've heard anecdotal stories from dealers who achieved rates as low as 3 – 4% for traditional trade-in leads, and we recently ran across a study highlighting an average 6% close rate across six of the nation's top third-party listing sites1.
For the purpose of this article, we'll use an average 12% close across all new and used car lead sources and the steps a dealership would need to accomplish to arrive at that rate using a sample 100 monthly leads. Bear in mind, many dealerships today struggle to achieve a 10% close, let alone the 12% highlighted below.
100 monthly leads
35% appointments set = 35
55% of appointments set show = 19
65% of appointments show close = 12
12 leads closed out of 100 = 12%
The importance of this equation is not the numbers that are shown here, but the numbers that aren't.
Of the 100 monthly leads this dealership processed, 65 people never committed to an appointment because they were either (1) never contacted or (2) not converted. What's more, the dealership lost 81 in-store customer engagement opportunities and missed sales of a potential 88 units.
Eighty-eight missed new and used sales, at an average $2,821 per2, equates to over $248,000 in missed gross monthly profit, or nearly $3 million in gross annual profit.
Many dealers are happy when they achieve a 10 – 12% close rate because it pencils, forgetting the fact that 88 – 90% of their opportunities got away.
Now, let's look at the math of live appraisal leads. The data below is based on actual results across an 18-rooftop dealer group spanning just one week in May 2020.
140 live consumer appraisals submitted
100% contact = 140
Vehicles traded = 39
39 leads closed out of 140 = 28% close rate
Each line item in the equation above tells an important story.
First, 140 consumers – in one week alone – were able to submit their trade-ins for a live appraisal from the convenience of their driveway and get a transactional cash offer in minutes. Even before COVID-19, consumers wanted a quick, easy, and convenient trade-in process backed by a meaningful offer, not an estimated value range.
Of the people who submitted their cars for appraisal, 100% were able to engage in real-time conversation with live appraisers and participating dealers about their trade-in and their replacement vehicle purchase.
Of the 140 appraisals that were submitted, 39 were traded. That's a 28% close rate, nearly 3X the industry standard.
What's more, the vehicle evaluation and cash offer process for the 140 leads delivered, were managed by live appraisers through The Appraisal Lane platform. Thus, requiring little processing and zero follow up by the dealership's sales staff, which increased efficiency and improved employee satisfaction. The Appraisal Lane’s platform promotes meaningful two-way dialogue in real-time between customers, appraisers, and the dealer – leading to increased engagement and a higher close rate.
It's time for our industry to strive for better – a better trade-in process, a better customer experience, and ultimately better close rates with increased revenue. Live appraisal leads are a great place to start to move us in the right direction.
1 Cox Automotive (November 2019)
2 NADA Data (2019)