The Subprime Auto Report

2005 Performance Study Still Useful to Study

Although the report is more than a year old, I believe the 2005 Industry and Dealership eBusiness Performance Study by the Cobalt Group is necessary reading, especially if you are involved with third party internet leads. If you haven’t read it, I recommend you do. There’s a lot to learn in the report, and it reveals how dealers are succeeding, and also failing, while using third party internet leads.

If you don’t have the time to read the entire report, that’s ok. I’m going to summarize the major findings. Then I’m going to follow up with another post giving you what I see as the important take-aways and areas of focus that can drive up your performance (all images in this post are from the Cobalt report).

Dealership Close Rates On Third Party Leads Vary Significantly

If you look at the chart above (the circle is mine) you see that dealership close rates using third party leads run from zero to twenty-five percent. The majority of dealers, about 950 of the 1300 or so that participated in the study, close between six and fourteen percent, with an average of about eleven percent. On either side of this core distribution are dealers that are either generally failing or succeeding at closing their leads. On the left, about 200 dealers close zero to five percent of their leads. On the right, about 350 dealers close between fifteen and twenty-five percent or better.

Your Leads Will Probably Buy, But Not From You

Fifty-six percent of leads that were generated in the Cobalt study bought automobiles, but only eight percent bought from the intended dealership, meaning the dealer that originally bought the lead.

Leads That Bought at the Intended Dealership Usually Bought Because of Price

Price is listed as the number one reason customers bought at the intended dealership. Second to that was the quality and quickness of the dealership’s response time. Factors that may seem important like trade value, existing relationship to dealership and inventory apparently don’t matter much to the buyers in this study.

Conversely, Leads That Buy From Other Dealerships Do So Primarily Because of Brand

Brand was listed as the number one reason customers bought elsewhere. However, brand in this example relates to new car brands, something not directly related to special finance leads (I’ll address this in the following post). Second to brand, dealership response (quality and speed) and price accounted for why thirty-five percent of customers bought elsewhere. Again, trade value and preexisting relationships with dealer played little role in the purchase decision.

Dealer’s Average Response Quality is Poor

Dealers in this study, on average, take over six hours to contact leads. The report shows that response time has improved 2004 to 2005, but that the quality of contact with leads is diminishing. Thirty percent of leads in the study received no response at all! Also, only about twenty-five percent of leads felt dealers answered their questions or used product highlights in their presentation.

The Customer Purchase Cycle Runs Beyond 90 Days

Forty-two percent of leads purchased an automobile in under thirty days. The report makes the point that sixty-eight percent of leads purchase in under ninety days. However, over thirty percent purchase greater than ninety days from the day they submitted their application online. This is important to note: customers in this study commonly waited more than three months before purchasing an automobile.

Those are the major points of the report. Reading the full report gives you more information than presented here. In the next post I’m going to give my feedback on what the findings of the Cobalt report mean to me, and how I think dealers can adjust their approach to increase their close rate.

About Cobalt/Dealix - The Dealix division of The Cobalt Group is a provider of third-party leads to automotive dealers.