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Hey everyone,
Ever wish for a dealer community that can help with woes like those listed here today? Find that and more with CDG Circles.
Have a great week!
— CDG
Earlier this month, we surveyed dealers across 400+ rooftops to see what was on everybody's minds.
Their worries were familiar: shrinking leads, underwater transactions, and affordability pressure.
After that, we hunted for timely solutions and found that, in each case, the real problem isn't necessarily the market or its strength, but rather knowing how to adapt.
So… here's how to measure leads the right way, structure underwater deals, and stop affordability from killing a close.
Dealers are reporting fewer leads, but the ones they have may be be more valuable than they appear.
The CDG Circles survey found 52% of dealers say lead volume is down, while just 22% say it’s up (see below).
Not necessarily a guiding metric of business health, but we wondered how those numbers could improve.
Then we found Steve White, CEO and founder of Clarivoy, a consumer purchase journey analytics firm.
He told us dealers should worry less about the quantity and concentrate on getting more from the leads they already have.
"If they're using leads as a scoreboard, that's the wrong scoreboard that they should be utilizing," White said.
Steve White
Clarivoy
Some background: Clarivoy tracks about 200 million shopping sessions and 1.4 billion pages across dealership and marketplace websites per month.
And their data shows consumers often float through the process anonymously these days.
"Shoppers didn't stop shopping," White told me. "They just stopped filling out forms."
In fact: Less than 5% of website visitors fill out a lead form. Meaning most of the purchase journey happens without dealers ever knowing (and without those shoppers adding to the lead stats).
The fix: Dig into those existing leads. (White approved my stab at an analogy: Don't buy more things to find your happiness, learn to be happy with what you have.)
Audit first-party data: How effectively does your store work leads that do come in? Are staffers following up across multiple channels, or just email and phone?
Lean into retargeting: Reach shoppers who visited your site on Meta, CTV, and other platforms.
Activate service customers: Clarivoy’s data shows that service customers convert to buyers at a higher rate than cold traffic.
Measure the full journey, not just form fills: Understanding which sources are actually generating gross, not just leads, allows dealers to redirect ad spend toward what's actually selling cars.
Bottom line: Can’t find more leads? Love the leads you have. (To riff off the Crosby, Stills, and Nash tune).
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F&I profits are holding, but underwater trades are often stalling deals before they get there.
Sixty-eight percent of our respondents said F&I grosses are expanding, the strongest signal in the entire report.
But that backstop only works if the deal makes it that far.
The survey also showed front-end grosses split almost down the middle: 41% of dealers report expansion, 40% compression.
Add in JD Power’s latest forecast (nearly a third of all trade-ins are underwater) and the picture gets a little clearer.
Compressed front-end margins + negative equity = a lot of deals stalling before they ever reach F&I.
Kenneth Criscione, finance manager at Harte Auto Group, said the COVID era helped fuel the situation in part due to cars purchased above sticker that lost value while still carrying large loan balances.
"Very few customers are coming in with any equity in the car right now," Criscione said.
Kenneth Criscione
Harte Auto Group
His approach: Know thy lenders.
Find lenders that loan off retail, not trade value: Prime lenders often book off trade value, which shrinks the advance. Retail-based lenders give more room to absorb negative equity into a new deal.
Know which lenders offer higher loan-to-value (LTV): Lenders willing to go 120% to 130% of vehicle value, plus back-end products, help free up the wiggle room needed to roll in negative equity without killing the deal.
Don’t forget the back-end: When the front-end margin is squeezed by negative equity, F&I products can still make money.
Consider leasing as a reset.
"You can lease the vehicle, get rid of all the negative equity, and at the end of the term have the option to purchase a different vehicle," Criscione said.
Dennis Gingrich, sales and finance director at The Niello Co., echoes the lender-first mindset.
His team proactively maps which lenders offer the biggest advances for underwater situations.
"You have to have the right banks with high loan-to-value," Gingrich said. "If you don't, it's going to be a very difficult proposition."
Dennis Gingrich
The Niello Co.
The signal: Study lenders and have a network ready to handle any equity situation, before a customer in a tough situation walks in.
Affordability is squeezing every buyer right now, but dealers can plan ways around it.
Nearly 60% of our survey recipients named affordability as a top risk for the next six months.
One fix: Gingrich's team has leaned into used vehicles to manage the affordability ceiling, while also training sales and F&I managers on non-captive lenders, such as US Bank or Ally, that can offer more aggressive lease programs.
The strategy, he said, is incremental, but it adds up.
Meanwhile, Criscione said customers know exactly what they want, and most won't substitute it.
"It doesn't matter how strapped they are, they still want what they want," Criscione said. "They're not taking a base model with no equipment."
So work it this way: Craft a deal that works around what the customer wants.
From there, he said, stick to the process, as in, lean on those selling skills.
For his team that means sticking to the process.
For instance, early in the sales journey at their stores, a salesperson checks in with the sales manage:
Here's what they're driving, here's what they owe. What should we be showing them?
This way, there’s no time wasted having customers fall for cars that won’t work for them.
Beyond that, he suggests the fundamentals, aka:
Reframing leasing for stretched buyers: Lower mileage leases with the option to prepay miles later can bring payments down.
And connecting the customer to the car before talking about the cost: Criscione said if a customer hasn't driven the car and fallen in love with it, no payment structure is going to close the deal. The product presentation has to come first.
Bottom line: Dealers are navigating a market with dwindling leads, complicated trades, and consumers on a budget.
That won’t change soon.
But boiled down, there is a “best” way to battle these truths, which is by studying up, returning to the basics, and planning ahead.
