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Local Auto Dealers Boosted Ad Spending Five Percent In 2022.

As more cars appeared on dealer lots last year after supply shortages disrupted sales in 2020 and 2021, there was an increase in ad spending in the category. The National Association of Automobile Dealers reports total dealer ad spending in 2022 was $8.57 billion, a five percent increase from 2021. And ad spending was up 15% compared to 2020 when the impact of the pandemic was felt on the car industry.

The nation’s 16,773 franchised dealers sold 13.7 million light-duty vehicles last year as sales topped $1.2 trillion, according to NADA’s annual tally. That was an eight percent decline from 2021 and was the lowest full-year sales total since 2012. But dealers made up for the dip elsewhere. NADA says dealerships also wrote more than 265 million repair orders, with service and parts sales totaling more than $137 billion.

“Despite the low volume, the average franchised dealership had a strong year,” says NADA Chief Economist Patrick Manzi. He says sales for the average dealership totaled $71.8 million, an increase of 1.2% compared with 2021. Manzi says in NADA’s annual report that while inventory was near a historic low at the start of 2022, inventory levels increased during the second half of the year. “We expect inventory to continue building slowly throughout 2023,” Manzi predicts.

Also helping is the shift to electric vehicles. NADA says last year was the best sales year yet for EVs. Sales of new EVs reached nearly 739,000 in 2022, up 61% compared with 2021.

According to the auto website Edmunds, the average purchase price of a new vehicle was about $30,000 in 2009, $40,000 in 2019, and almost $46,000 in 2022. And NADA says the average price gap between base models and vehicles optioned up by customers has increased from 24.6% in 2002 to 38.1% in 2022. Price breaks also remain hard to come by.

Despite incentive programs that remained in low-gear or were nonexistent altogether, the lower volume of cars pushed the per-vehicle total for how much was spent on marketing for each car or truck sold. NADA says the average dealer spent $718 on advertising for each new vehicle sold last year. That was an increase of 19% from a year earlier as it not only surpassed the $640 spent per vehicle in per-pandemic 2019, but it was the highest per vehicle ad total recorded during the past several years. The low point was $582 in 2020.

Digital ads captured a record two-thirds of dealer ad dollars last year, as online media’s share rose three points from a year earlier. Yet even though both national brand and dealer advertising has increasingly been focused on digital, the NADA data shows local dealers continue to funnel some of their marketing dollars into local media outlets to drive awareness. But the NADA data shows that investment mix is not as it has been in the past, as dealers shift dollars out of all media with the gap between radio and television not nearly as large as it once was.

The report says dealers put 7.8% of their ad dollars into radio last year, a two-point decline from a year earlier. Television’s share fell to 10.2% in 2022, down from 12.4% in 2021. And newspapers captured 2.8% of dealer ad dollars, down from 4.5% a year earlier.

NADA estimates the typical new car dealership spent $511,058 on advertising last year. Radio’s share of that total averaged $39,730. While that is more than double what was spent on newspapers and more than direct mail, it was still less than the $52,000 spent by the average dealer on television or the more than $348,000 spent on internet advertising.

As dealer inventories continue to improve, NADA predicts that 14.6 million new vehicles will be sold this year, an increase of 6.6% from 2022. In addition to more cars available, it says inflation has begun to cool across the economy, although new car and truck buyers still have the highest financing costs in decades. NADA says consumer sentiment also remains very low when compared to pre-pandemic levels and the post-vaccine peak level in April 2021. That could lead to the creation of more incentive programs, and in turn, more advertising.

“Despite pressures on the economy and consumers’ wallets, new-vehicle demand remains elevated,” Manzi says. “With the worst of the chip shortage behind us and new vehicle production set to increase, new vehicle sales are expected to improve in 2023 after declining last year.”

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