Local Auto Dealers Boosted Ad Spending Nine Percent In 2021.
Despite supply challenges, Americans bought 14.9 million new vehicles from auto dealers last year as low interest rates often led to consumers waiting for the cars and trucks that did make it to showrooms. The National Association of Automobile Dealers reports total dealer ad spending in 2021 was $8.19 billion, a nine percent increase from pandemic-impacted 2020.
“The major theme for America’s franchised new-vehicle dealers in 2021 was constrained inventory. The coronavirus pandemic and resulting microchip shortage and production cuts significantly restricted new-car and -truck inventory at dealerships across the country,” said NADA Chief Economist Patrick Manzi. “Even so, average dealership total sales set a record, topping $71 million. Total sales for all new light-vehicle dealerships exceeded $1.18 trillion after falling below $1 trillion in 2020, the first year of the pandemic.”
Vehicles that were selling drove off the lot at a record price. NADA says the average new car sold for $42,329 last year. That was nearly $6,000 more than what the typical new car sold for in 2019. And the average used car sold for $26,709 last year, which was also a $6,000 increase from pre-pandemic 2019.
But with incentive programs still scaled back or nonexistent, not as much was spent on marketing as when dealer lots were full with cars. NADA says the average dealer spent $602 on advertising for each new vehicle sold last year. That was actually an increase from the low point recorded in 2020. But it was still nowhere near the $640 spent on advertising for each new vehicle in 2019.
Even though both national brand and dealer advertising has increasingly been focused on digital, the NADA data shows local dealers are relying on local media outlets to drive awareness. It estimates one of every ten dollars spent by local dealers went to radio, with another 12% going to local television and five percent to local newspapers. The internet now captures the largest share of local dealer budgets, however, with NADA estimating nearly two thirds of what dealers spend goes to online ads.
NADA estimates the typical new car dealership spent $491,038 on advertising last year. Radio’s share of that total averaged $48,122. While that is more than double what was spent on newspapers and more than direct mail, it was still less than the nearly $61,000 spent by the average dealer on television or the more than $312,000 spent on internet advertising.
Despite continued supply chain issues, higher interest rates, and even the risk of a recession, NADA is optimistic this year will deliver additional recovery from the auto market. Electric vehicles and other alternative-fuel cars and trucks accounted for 9.5% of new vehicles sold last year, and that number is expected to increase this year as new electric models come to market and consumers gobble them up to avoid some of the highest gas prices in years.
“Looking ahead into 2022, we expect that sourcing new- and used-vehicle inventory will be top of mind for dealers across the country and that the chip shortage and its impact on vehicle production will extend into 2023,” said Manzi. “Despite this challenge, we are confident that 2022 will end up another solid year for America’s franchised dealers.”