10% of Your Leads Have a Trade. 50% of Your Deals Do. Why Is Your Missed Trade Report 3 Pages Long?

The short answer: Dealers miss trades for three reasons: they ask about the trade too late, they appraise too few of the customers who walk in, and they desk the car they are selling instead of the car they could be buying. Across the stores we coach at Lotpop, only 10 to 15% of CRM leads have a trade attached, yet 40 to 50% of closed deals include one. That gap is where your missed trade report comes from. You close it by surfacing the trade on the first contact, appraising 100% of the customers you put on paper, and treating your own showroom traffic as your cheapest inventory source.

By John Anderson, Coach at Lotpop. John spent decades running dealerships as a GM before joining Lotpop, where he coaches dealer partners across the US and Canada on used car operations and lead management. He hosts LotTalk alongside Chris Keene and Renaldo Leonard. Connect with John on LinkedIn.

This week on LotTalk, Chris was in Canada with a dealer group, so Renaldo and I worked a little looser than usual. The topic came straight out of a meeting I had with a dealer partner this week, and I think most of you will recognize the store.

Why Does a 125-Car Store End Up Selling 80?

The dealer principal told me his used department used to run 125 to 150 units a month, before and through COVID. They have been flat at 80 for a while now, and he wants it back. New car allocation is finally flowing again, so his new department is up, and he knows that winning trades is what feeds both sides of the lot.

I opened his missed trade report, which is the report in your inventory management tool that shows vehicles you appraised that later showed up for sale on another dealer's lot. His was three pages long. And when I compared his appraisal numbers to where those same cars were sitting at retail across town, the separation was big. Not a few hundred dollars. Big.

Then I looked at his CRM. A little over 500 active used car leads in the last 60 days. Fifty-four of them had a trade attached. About 10%.

He kept telling me he needed to hire more people to throw at the problem. He doesn't. He needs to change three habits.

What Is the Trade Capture Gap?

The trade capture gap is the difference between the percentage of your leads that show a trade in the CRM and the percentage of your closed deals that actually include one. In most stores it's 10 to 15% on the front end and 40 to 50% on the back end. Renaldo put it plainly: that gap only exists because nobody asked early enough.

Renaldo's target is tight. He wants the percentage of leads with a trade attached to land within five points of the percentage of deals that transact with one. If half your deals have a trade, half your leads should show one in the CRM before the customer ever hits the lot.

Remember, that customer sent 12 to 15 leads for the car they want to buy. They are also, whether they know it or not, shopping their trade to 12 to 15 dealers. And if one of those leads didn't go to Carvana or CarMax, the customer probably already got an instant number from one of them anyway. You are competing for the trade before you ever say hello.

How Do You Ask for the Trade Without Asking for the Trade?

We trained customers during COVID that they don't have to trade their car where they buy one. We also trained them to guard that information, because a lot of them have had their heads lopped off at the desk.

So don't ask “do you have a trade?” Ask about the car they drive today. On that first lead response, after you answer the question they actually asked, it sounds like this:

“I appreciate your interest in the 2024 Tahoe. What about it caught your eye? And how does it compare to what you're driving now?”

You just got the trade into the CRM without the word “trade” coming out of your mouth. Renaldo came up through oil and gas sales before cars, and his rule is to ask the same question seven different ways. You'll get the answer.

This also fixes a follow-up problem. We coach a contact attempt every three days on an active lead for an in-stock unit. If every one of those touches is “still interested in the Tahoe?”, you've become noise. Break the rhythm by flipping it: “We need inventory. What do you have sitting in the driveway you'd sell us?” Now you're not selling. You're buying. Last week we covered why your follow-up is still a template when the lead went to 14 other dealers.

What Should Your Look-to-Book Actually Measure?

Most stores define look-to-book as appraisals versus cars purchased. We define it one layer earlier.

Look-to-book, the way we use it at Lotpop, is three numbers: how many customers came through the door, how many of them you put on a worksheet, and how many of those worksheets got an appraisal. I asked Renaldo what he'd want those numbers to be. His answer was 100% and 100%. If a guy rolls onto the lot on a bicycle, Renaldo is telling him what the bicycle is worth.

Nobody leaves without numbers. If they leave without numbers, what did you accomplish? You shook a hand and sent them to the store down the street to get numbers and stop there.

And when you've tried everything and they're still walking, change the subject entirely. Forget our car. Let me buy yours. What would it take? Even if they don't answer, that's the last thing in their head when they're sitting at the next dealer's desk getting lowballed. Nobody else is going to beg for their car. You just did. That's your second shot, and sometimes it's a phone call a week later: “I bought the car somewhere else. What will you give me for mine?” If you need inventory, that's a win.

What Does a $6,000 Desk Touch Tell Your Customer?

Renaldo shopped a store in the Dallas-Fort Worth area recently. Flawless lead response. He told them up front he had a trade and gave them the vehicle. They didn't give him a number until he was on the showroom floor, and when they did, it was unrealistic. He thanked them and stood up to leave. The salesperson touched the desk, came back, and the number jumped six thousand dollars.

Renaldo's reaction is the one your customers have every day: these guys aren't serious. Your customer walked in with a baseline from their phone. You can't run your appraisal process for the 20% of people who are unrealistic and alienate the 80% who did their homework.

Know the payoff before you quote the number. Edmunds reported that 29.1% of financed trade-ins toward new cars were underwater in Q3, by an average of $7,107. That is not a reason to lowball. It's a reason to ask the finance question early so you know what you're solving for.

How Do You Set an Appraisal Floor That Protects You?

Here's the method I use, built on data Jasen Rice has brought to the table since I've known him: when a unit passes 60 days in inventory, the sale rate spikes once it's priced at 88 to 90% price-to-market or below. That's not a pricing recommendation for fresh cars. It's the number aged cars actually move at.

So build the appraisal backward from it. This is what I call the zero-gross appraisal floor:

1. Zero out the gross in your appraisal tool and lock it.
2. Drop price-to-market to 88 to 90%. That number is your floor, meaning if the car ages out on you, you can get out what you put in (not your recon, not your holding cost, but the ACV).
3. Lock the floor, then build back up to 98 or 100% price-to-market. The difference is your gross to work with.

When I ran this on my dealer partner's recent appraisals, there was real money being left on the table, and the floor was still protecting him. Most of his missed trades weren't missed because he was reckless. They were missed because he was appraising like a wholesaler at a store that retails cars. Here is why CarMax gave up $111 a car to sell 13.8% more, and what it says about your 60-day aging policy.

Where Are the Sub-$15,000 Cars, and Who Is Buying Them?

Cox Automotive's September used inventory report put the average listing at $27,235, the highest monthly average since December 2022. Days' supply rose to 49 from 44. Under $15,000, days' supply was 34, up from 29 in August but still 15 days below the market average, and that price band has shrunk 16.2% year over year.

Everybody tells me you can't find those cars. Somebody is finding them. Carvana and CarMax are. So here are two ways to think differently.

Renaldo's approach, from his West Texas days: if half-ton trucks at $20,000 to $25,000 are where your payment-capped customers live, go find the $10,000 to $15,000 trucks with miles and dings and over-condition them into that band. You'll have some pretty pigs on the lot, but they'll bring all the money and turn fast. Be honest with the customer about where the market is, take care of them on this one, and earn the next two.

My approach: employ your entire staff. A bird dog program pays an employee or a friend-of-the-store for bringing in a car or a buyer you transact on. Build a “Friends and Family” distribution list in your CRM with every employee and their family. Send them the list of what you're looking for. When a porter spots a clean Camry for sale at dinner, calls the number, and gets it into your service drive for an inspection, and you buy the car, pay the porter that day. Not next paycheck. You want them excited and back out looking. Same for a salesperson having a slow month: turn them loose on Marketplace with a target list and a second income stream. More on building a sourcing strategy that doesn't depend on the lane.

Renaldo once mailed a $1,000 unsigned check to a struggling salesperson's mother with a note: if Johnny hits his number, bring this to me and I'll sign it. A week later Johnny was begging for mercy. Incentivize the behavior you want. You'd be surprised how many “problems” are just strategies you haven't implemented.

What Does “What You Got?” Do to a Sales Desk?

One more thing, and it costs nothing. Every salesperson approaching your desk right now expects an ass-kicking. They just spent two hours in five cars with a customer, and in ten seconds a manager tells them the guy is ten grand flipped and they've got nothing.

Flip it. When you see them coming from twenty feet away: “What you got? Come on, let's go.” Renaldo's line is that you can't get a positive charge off a dead battery. That energy travels from the desk to the salesperson to the customer on the phone, who just heard the same flat tone from five other stores. And it's why salespeople line up behind the manager who puts deals together and avoid Eeyore. Related: why your used car margins are compressing, and the $2,380 a copy you're ignoring.

You can't get a positive charge off a dead battery.

The Bottom Line

Your missed trade report is three pages long because the trade conversation starts too late, too few customers leave with numbers, and your appraisal is built like a wholesaler's instead of a retailer's. Ask what they're driving on the first contact and get it in the CRM. Put every up on a worksheet and every worksheet through an appraisal. Build your floor at 88 to 90% price-to-market with gross locked at zero, then build up. Then put a bounty on inventory and pay your people the day a car lands. The customer already decided to trade. The only question is who buys it.

Want a coach to pull your missed trade report and your lead trade percentage side by side? Book a LotWalk demo.