7 Proven Strategies to Reduce CAC in Car Sales

The automotive industry is undergoing a big shift as digital technology and changing consumer habits take center stage. More car buyers are now starting their search online, spending less time at dealerships and relying on independent research. This trend is pushing dealerships and car brands to find more cost-effective ways to bring in customers, especially since the cost per lead (CPL) can vary dramatically. For standard vehicle sales, dealerships typically spend around $42.52 per lead, but for luxury brands like Ferrari or Lamborghini, that cost can skyrocket to over $3,000 per lead.

High customer acquisition costs (CAC) can eat into profit margins quickly, especially with the growing competition in the market. As the industry evolves, many of the traditional ways of attracting customers aren’t as effective as they used to be. To stay competitive, dealerships need to embrace more innovative and efficient strategies that reduce costs without compromising lead quality. By refining how they bring in new customers, dealerships can save considerable amounts of money while boosting overall sales and performance in the long run. Let’s explore how these strategies can help.

Strategy 1: Use Virtual Sales Agents to Engage Customers
Strategy 2: Optimize Your Digital Marketing Mix
Strategy 3: Use Data-Driven Targeting and Personalization
Strategy 4: Implement a Referral Program
Strategy 5: Invest in Retargeting Campaigns
Strategy 6: Streamline the Sales Funnel
Strategy 7: Utilize Customer Reviews and Testimonials
Conclusion

Strategy 1: Use Virtual Sales Agents to Engage Customers

The way customers shop for cars has changed, with many now expecting immediate responses to their inquiries at any time of day. Virtual sales agents can step in here, providing 24/7 support without needing a human salesperson to be on hand. Onlive.site’s virtual sales agent solution,  built with the automotive industry in mind, can answer questions, qualify leads, and help guide customers through their journey, making the sales process smoother for both buyers and the dealership.

What makes a virtual sales agent solution stand out is its ability to handle high volumes of inquiries and streamline the customer experience. By managing initial inquiries, offering details about vehicles, and scheduling test drives, it frees up the sales team to focus on leads that are already warmed up and ready to buy.

How Virtual Sales Agents Improve Efficiency

• Enhanced Availability: The most obvious benefit is that virtual agent solutions reduce the limitations of availability. Whether someone visits your website, they can get immediate answers to their questions, keeping potential leads engaged and reducing drop-off rates.
• Instant Lead Qualification: Virtual agents can instantly ask the right questions to qualify leads, saving your sales team time. They only pass along serious buyers, allowing your team to focus on high-value prospects.
• Scalability: As your dealership grows, virtual sales agents can handle an increasing volume of inquiries without requiring you to hire additional staff. Whether you’re managing dozens or thousands of interactions, the virtual agent can scale to meet demand.
• Better Customer Experience: Immediate, helpful responses improve the customer journey, creating a smoother path from initial inquiry to final sale. According to a study by PwC, 84% of customers say that being treated like a person, not a number, is key to winning their business, and a personalized virtual sales experience plays a big part in that.

Škoda's Results with Virtual Sales Agents

Škoda implemented Onlive.site’s virtual sales agent to enhance lead generation and improve customer engagement. Within the first week, they saw their leads doubled, and over time, they consistently captured 250 qualified leads each month. These weren’t just casual inquiries—the virtual agent handled initial customer interactions, ensuring that only serious prospects were passed on to the sales team, which made the sales process more efficient.

The customer experience also improved dramatically. With 24/7 availability, customers could engage with the dealership whenever they wanted, leading to weekly satisfaction scores of 4.5 out of 5. This combination of higher lead quality and improved customer experience helped Škoda streamline their operations and reduce the time spent on lower-quality leads. Download the case study here.

Strategy 2: Optimize Your Digital Marketing Mix

For dealerships, simply throwing money at every available marketing channel isn’t an effective way to reduce customer acquisition costs (CAC). Instead, focusing on the platforms and strategies that deliver the best returns can make a significant difference. Optimizing your digital marketing mix means honing in on what works, cutting what doesn’t, and constantly fine-tuning your approach to get the most value from your spend.

Why It Matters

The car-buying journey has shifted heavily online, with customers spending more time researching than ever before. Digital channels like search ads, social media, and email marketing are powerful tools—but only if they’re used strategically. Automotive brands that rely on data to guide their marketing efforts are seeing impressive results. Take Kia UK, for example. By adopting value-based bidding (VBB), Kia focused its budget on leads more likely to convert. The results? A 20% boost in value, a 10% decrease in cost-per-acquisitions (CPA), and a 13% increase in conversions. 

In another case, an automotive brand was able to save $2 million by using data insights to eliminate underperforming TV and streaming ads. The key here was analyzing which channels delivered high engagement and cutting the ones that didn’t, freeing up more budget for higher-performing platforms.

How to Optimize Your Digital Marketing Mix

• Leverage Data: Use tools like Google Analytics or Facebook Ads Manager to track which channels drive the most conversions. Focus your spend on those channels and scale back on the ones that aren’t performing. Kia's use of data to shift toward value-based bidding is a perfect example of how focusing on ROI, not just volume, can cut costs while driving better results​.
• Target Locally: Geo-targeting allows you to direct your ads to potential customers who are already in your area and looking for your services. This  makes your ads more relevant and helps you cut down on wasted impressions.
• Constantly Optimize: Regularly A/B test your ad copy, visuals, and audience targeting to ensure you’re getting the best performance. Kia’s success didn’t happen overnight—it was the result of continuous testing and adjusting their approach based on real-time performance.
• Choose Channels Wisely: Instead of spreading your budget across too many platforms, focus on the channels that have proven to drive results. When a major automotive brand identified underperforming TV platforms, they reallocated those funds to more effective digital ads, cutting wasted spend while improving campaign outcomes​.

Strategy 3: Use Data-Driven Targeting and Personalization

Using customer data is essential for dealerships to fine-tune their marketing strategies. Rather than casting a wide net and hoping for the best, data-driven targeting allows you to zero in on the leads most likely to convert, helping cut down on unnecessary spend. It’s all about being smarter with your resources, focusing efforts where they matter most, and delivering the personalized experience that customers now expect.

Why Data-Driven Targeting Works

Data isn’t just numbers—it’s a powerful tool that gives insight into customer behavior, preferences, and buying patterns. With the right data in hand, car brands can better understand which leads are more likely to make a purchase and when they’re most likely to convert. It’s a shift from the old “spray and pray” approach to something far more strategic.

By utilizing predictive analytics, brands can forecast the likelihood of a lead turning into a sale, allowing the sales team to focus their time and resources on high-quality prospects. This reduces wasted effort and helps keep customer acquisition costs in check.

Steps for Using Data Effectively

• Get a Solid CRM: Your first step is implementing a customer relationship management (CRM) system that can track all customer interactions—emails, website visits, inquiries, and more. A CRM doesn’t just store data; it helps you see patterns and provides actionable insights.
• Use AI for Predictive Insights: Predictive analytics can take this data and help identify leads that are more likely to convert based on their behaviors. It helps prioritize which leads deserve more attention from your sales team.
• Personalize Communication: Data lets you tailor your messaging to specific customer needs and behaviors. Whether it's through email, digital ads, or even website content, personalization can significantly boost engagement. In fact, 91% of consumers are more likely to buy from brands that offer relevant recommendations based on their preferences​.

Strategy 4: Implement a Referral Program

For car brands, a well-structured referral program can drastically lower customer acquisition costs by turning satisfied customers into valuable brand advocates. Instead of relying heavily on expensive advertising, referral programs help bring in high-quality leads through trusted recommendations. These referrals come from customers who already love your brand, and the trust they carry translates into better conversion rates and long-term loyalty.

Why Referral Programs Work

Referral programs capitalize on personal recommendations, which consistently perform better than traditional advertising methods. According to Nielsen, 92% of consumers trust recommendations from friends and family over any form of marketing​. This means that leads generated through referral programs are more likely to convert and often require less convincing to close the sale. For car brands, this means spending less time and money attracting and nurturing leads, all while improving the customer experience.

Referrals don’t just generate leads—they often bring in more loyal customers who have a pre-existing trust in the brand, leading to higher satisfaction and repeat purchases. Additionally, referral programs can reduce the cost of customer retention by fostering stronger connections between your brand and its community.

How Car Brands Can Develop Effective Referral Programs

1. Integrate Referral Programs Seamlessly Into the Customer Journey Referral programs should feel like a natural extension of the customer experience. Brands can make it easy for customers to refer others by providing referral options at key points in their journey, such as after a vehicle purchase or during a service appointment. Offering a digital platform—through the brand’s app or website—that allows customers to quickly share a referral link or code can help increase participation.
2. Offer Dual Incentives To encourage participation, it’s important to offer compelling rewards to both the referrer and the new customer. For instance, the referrer could receive a service discount, free vehicle maintenance, or even gift cards, while the new customer might get a discount on their first purchase. Tesla, for example, offers free Supercharging miles to both parties, creating an appealing incentive for Tesla owners to share their experience with others​.
3. Promote the Program Across All Channels The success of a referral program depends on visibility. Brands should promote the program through email campaigns, social media, and in-store interactions. Post-purchase follow-up emails are an excellent time to remind satisfied customers about the referral program, while social media offers the chance for customers to share their referral link more broadly.
4. Create a Tiered Reward System A tiered system encourages repeat referrals. For example, after the first referral, a customer might receive a basic reward, but after three or five referrals, they could earn something larger, like a major service package or significant cash rewards. This structure motivates customers to stay engaged with the program over time, bringing in more high-quality leads.
5. Highlight Success Stories Use real customer stories and testimonials to demonstrate the effectiveness of the referral program. Whether through video or social media posts, showcasing satisfied customers who’ve benefited from the program promotes it and reinforces the trust factor for potential referrers and new customers alike.

Tesla's Referral Program Success

Tesla's referral program offers a powerful example of how a car brand can grow its customer base while keeping customer acquisition costs low. Instead of spending heavily on advertising, Tesla relied on its enthusiastic customer base to spread the word. The program incentivized both the referrer and the new customer with rewards like free Supercharging miles, invites to exclusive Tesla events, and even high-ticket prizes like the next-generation Tesla Roadster for top referrers.

The simplicity and ease of the referral program were key. Customers could share their referral link through the Tesla app, and the program was fully integrated with Tesla’s systems, allowing both referrers and the company to track referral progress. By offering highly desirable rewards that aligned with their customer base’s values—like sustainability and exclusive experiences—Tesla managed to keep customer acquisition costs down, all while growing their brand through word-of-mouth.

The program was so effective that Tesla famously scaled to a multi-billion-dollar company with a $0 traditional advertising budget, proving that a well-designed referral program can drive significant growth​.

Strategy 5: Invest in Retargeting Campaigns

Not every potential car buyer makes a purchase on their first visit to your website, and that’s where retargeting comes in. Retargeting campaigns allow car brands to reconnect with those visitors, keeping your brand in front of potential buyers as they continue researching and comparing options. By delivering personalized ads that target their specific interests—like the model they viewed or special offers—you can guide them back to your site when they’re ready to make a decision.

Why Retargeting Works

In the car-buying journey, customers often take their time—visiting websites, comparing models, and leaving before they commit to a purchase. Retargeting lets you stay top-of-mind by reminding these potential buyers about the models they’ve already shown interest in. This kind of targeted advertising can boost conversions and improve return on ad spend (ROAS) because it specifically targets warm leads—those who’ve already engaged with your brand in some way.

Retargeting also allows brands to personalize ads. For example, if a user spent time viewing an SUV on your website, dynamic retargeting can show them ads for that exact model, perhaps paired with a limited-time financing offer. By tailoring these ads to the customer’s behavior, brands can boost engagement and increase the chances of a conversion.

Actionable Steps for Car Brands:

• Take Advantage of Dynamic Retargeting: Use platforms like Google Display Ads or Facebook Ads to create dynamic retargeting campaigns that show personalized ads based on what customers viewed on your site. This approach helps keep your ads relevant and increases the likelihood of converting leads.
• Use Limited-Time Offers: Encourage customers to return by offering incentives like a discount or special financing. This creates urgency and gives customers an extra push to complete their purchase.
• Segment Your Audience: Not all website visitors are the same. Segment users based on their actions (e.g., those who configured a car versus those who browsed for general information) and tailor your ads accordingly.

Volkswagen and Dynamic Retargeting

Volkswagen took a personalized approach to re-engage potential buyers who had previously visited their site but left without taking action. Through dynamic retargeting, Volkswagen was able to show ads featuring the exact models that users had viewed, creating a more tailored and relevant ad experience. By targeting these warm leads, Volkswagen ensured that their retargeting ads were not just generic car ads, but specifically linked to each visitor’s browsing behavior, which made the ads much more compelling.

The brand didn’t rely on just personalization; they also introduced limited-time offers to create a sense of urgency. These offers included incentives such as special financing deals or discounts, designed to nudge customers closer to making a purchase decision. The ads appeared on platforms like Google Display and Facebook, helping Volkswagen maintain visibility across the digital landscape as potential buyers continued their research.

As a result of this strategy, Volkswagen achieved a 26% increase in conversion rates, demonstrating how effective retargeting can be when it’s personalized and incentivized​. The combination of dynamic ads and targeted incentives helped them convert visitors who might have otherwise slipped through the cracks, all while improving the return on their ad spend.

This case illustrates how car brands can re-engage leads more effectively by using data-driven, personalized marketing tactics and well-timed offers, leading to stronger engagement and better conversion rates.

Strategy 6: Streamline the Sales Funnel

The car-buying process can often be a drawn-out experience, with multiple touchpoints, paperwork, and delays. Streamlining the sales funnel can make a big difference in converting leads faster while reducing customer acquisition costs. By simplifying the customer journey and eliminating unnecessary steps, brands can speed up the process, making it easier for potential buyers to move from interest to purchase.

Why Streamlining is Essential

A complicated sales funnel doesn’t just frustrate customers—it costs car brands valuable time and money. Each additional step is another opportunity for a potential buyer to lose interest or get stuck in the decision-making process. Simplifying the journey is key to keeping customers engaged and focused on completing their purchase. By reducing friction, brands can shorten the sales cycle and lower acquisition costs, all while providing a more seamless experience.

The faster you can move a lead from initial interest to final purchase, the more efficient and cost-effective your sales process becomes. Nowadays buyers expect quick and easy transactions. Brands that deliver on that expectation save money and create a more satisfying experience for their customers. Small changes, like removing unnecessary steps or offering digital tools, can make all the difference—helping you convert leads into buyers while keeping acquisition costs in check.

Actionable Steps to Streamline the Sales Funnel:

• Implement CRM Tools for Follow-Up: A robust CRM system helps track where customers are in the sales journey and automates follow-up actions. This ensures that leads are nurtured without requiring constant manual attention from the sales team. Automated follow-ups can improve engagement and keep the customer moving through the funnel.
• Offer Self-Service Digital Tools: Tools like online financing calculators or trade-in estimators provide customers with quick answers to key questions. These tools speed up decision-making, allowing buyers to progress through the sales journey without needing to contact a salesperson for every small detail. Brands like Ford and Chevrolet have had success using such tools to streamline customer interactions​.
• Cut Unnecessary Steps: Simplifying the number of steps in the sales process is crucial. If there are redundant steps that don’t add value or can be completed digitally, they should be removed. For instance, offering virtual consultations or online contract signings can eliminate unnecessary dealership visits, speeding up the entire process.

Nissan’s Simplified Sales Funnel

Nissan provides a great example of how streamlining the sales funnel can dramatically improve both efficiency and customer experience. Like many car brands, Nissan faced the challenge of a lengthy and fragmented sales process that often resulted in customer drop-offs and higher acquisition costs. To address this, they focused on two major areas: integrating digital tools and automating follow-ups.

Nissan implemented digital tools that allowed customers to handle key steps—like financing, trade-in valuations, and even some paperwork—online. By doing this, they made the process much more convenient for buyers, who could now complete large parts of the car-buying journey from home. This removed the need for multiple in-person visits and drastically cut down on time spent in the dealership.

In addition to these digital tools, Nissan also introduced a robust CRM system that automated follow-ups and tracked where each customer was in the sales journey. This allowed their sales teams to focus on the leads most likely to convert, instead of spending time on cold or unqualified prospects.

The results were impressive: Nissan saw a 15% reduction in sales cycle length, which meant faster conversions and lower acquisition costs. This boosted their bottom line, and also improved customer satisfaction. Buyers appreciated the smoother, faster experience and felt more in control of the process​.

Strategy 7: Utilize Customer Reviews and Testimonials

One of the easiest and most impactful ways for car brands to build trust with potential buyers is by showcasing real customer reviews and testimonials. In an industry where trust is everything, seeing genuine experiences from other buyers can be the final nudge a potential customer needs. Think about it—when someone is on the fence, reading about how others had a great experience makes all the difference. It’s proof that your brand delivers, without you having to ramp up your marketing spend. Buyers are more likely to trust what others say about your brand than what your ads tell them.

Why Reviews and Testimonials Matter

Today’s car buyers do their research. Before even stepping into a dealership or booking a test drive, they’re reading reviews, checking ratings, and listening to what other customers have to say. Brands that have a strong online reputation built on positive reviews tend to stand out and attract more interest. It’s not just about listing features or offering competitive pricing—buyers want to know they can trust your brand, and nothing does that better than the honest opinions of your existing customers.

In fact, studies have shown that 84% of people trust online reviews as much as personal recommendations​. That’s why encouraging satisfied customers to share their stories should be a key part of any car brand’s strategy. The more positive feedback you have, the stronger your online presence becomes—and the less you need to rely on expensive marketing tactics to attract leads.

Actionable Steps to Maximize Reviews and Testimonials:

• Actively Ask for Reviews: Don’t wait for customers to leave feedback on their own—ask for it. After a customer completes a purchase, follow up with a simple, polite request for a review. Timing matters here—customers are most willing to share their experience when it’s still fresh in their minds. Consider sending an automated email within a few days of the sale to make the process easy for them.
• Showcase Testimonials Everywhere: Positive reviews and testimonials shouldn’t just live on third-party sites like Google or DealerRater. Feature them prominently on your website, in your ad campaigns, and across your social media platforms. The more visible they are, the more potential buyers will come across them during their research. Ford, for example, regularly integrates customer testimonials in their advertising to highlight real-world satisfaction with their vehicles​.
• Address Negative Feedback Promptly: No one likes receiving negative reviews, but they’re bound to happen. What matters is how you handle them. Responding quickly and professionally to any complaints shows that you value customer feedback and are committed to making things right. It also gives potential buyers confidence that your brand is responsive and cares about their experience, even when things don’t go perfectly.

Toyota’s Mastery of Customer Reviews and Testimonials

Toyota has effectively built customer trust by making feedback a core part of their marketing strategy. Through their Consumer Insights Team, Toyota collects customer reviews and uses them across digital marketing and social media platforms. This real-world feedback helps potential buyers connect with the brand by showcasing the experiences of actual Toyota owners​.

What sets Toyota apart is their engagement with reviews, both positive and negative. By responding to customer feedback on platforms like Google and Cars.com, Toyota demonstrates a commitment to transparency and improvement. This open interaction strengthens their reputation and reassures potential buyers that their concerns will be heard​.

Toyota's emphasis on using customer testimonials has contributed to higher conversion rates and stronger customer loyalty, proving that genuine reviews can be a powerful tool for attracting new buyers​.

Conclusion

Reducing customer acquisition costs is becoming more critical as the automotive industry continues to evolve with digital technology and shifting buyer behaviors. Traditional methods of attracting customers are increasingly less effective, which is why car brands and dealerships need to adopt more innovative and data-driven strategies. By implementing proven approaches, like using virtual sales agents, optimizing the digital marketing mix, and using data-driven targeting, brands can cut down acquisition costs without sacrificing lead quality.

To stay competitive, car brands must continue refining how they attract and engage customers, adopting these forward-thinking strategies to maintain profitability in a crowded market. For those looking to take their customer acquisition efforts to the next level, services like Onlive.site's virtual sales agent solution can be a game-changer, offering 24/7 customer engagement, lead qualification, and support. Visit Onlive.site to learn more about how our solutions can help reduce your acquisition costs and streamline your sales process.