Local Auto Dealers Spent More On Ads In 2023. Radio’s Share Increased To Near-Even With TV.

The auto industry continues down a post-pandemic road to normalcy and that was reflected in an acceleration in advertising. The National Association of Automotive Dealers says local car dealers spent four percent more on advertising last year, with dealers spending a combined $8.9 billion. That was a $330 million increase compared to what was invested on marketing a year earlier, and an increase of $1.4 billion from the low post seen in 2020.

The nation’s 16,835 franchised dealers sold 15.5 million light-duty vehicles last year as sales topped $1.2 trillion, according to NADA’s annual tally. It says the average new car selling price was $47,014. NADA also reports that local dealers sold 12.7 million used cars last year for an average $29,308. And local dealerships wrote more than 264 million repair orders, with service and parts sales totaling more than $142 billion.

“In 2023, new light-vehicle inventory grew steadily, and each month new light-vehicle sales increased year over year compared with 2022,” says NADA Chief Economist Patrick Manzi. In the trade group’s annual report, he says at the end of 2023 there were 2.3 million cars ready for sale, and that meant consumers didn’t have to wait as long to secure a new vehicle as they did during the two prior years. “In 2024, we expect that inventory levels will increase throughout the year and that the industry will see month-to-month sales and inventory patterns that were considered normal before the turbulent few years caused by the pandemic and microchip shortage,” Manzi says.

While the total $8.9 billion spent on advertising was the most this decade, overall advertising levels still lags what local dealers allocated to marketing prior to the pandemic. NADA says dealership advertising peaked in 2016 when $9.82 billion was spent to reach consumers.

Sticker prices have continued to climb. NADA says the average new-vehicle transaction price rose by only 1.6% in 2023. But that was less than the 9.2% jump recorded in 2022. “We expect that average transaction price growth will be flat to up slightly in 2024,” Manzi predicts.

But as inventory levels have grown during the past years, some carmakers have begun to increase the number of incentives they are offering, and that is often tied closely with ad spending. According to J.D. Power, average incentive spending per unit was $2,633 in December 2023, up 110% from December 2022. But Manzi says inventory levels vary by brand, and those with more available inventory are likely to have higher incentive spending in 2024.

NADA says the average dealer spent $708 on advertising for each new vehicle sold last year. That was a drop of ten dollars from a year earlier, but it still easily surpassed the $640 spent per vehicle in pre-pandemic 2019. The low point was $582 in 2020.

Television was once the king of media for local car dealers, but that is no longer the case. Instead, digital advertising is where most of their marketing dollars go. NADA says a record 72.2% of local dealer advertising was spent on search engine marketing, social media, and third-party listing sites. Television’s share was no bigger than what radio got, with one of every ten dollars going toward TV ads.

Radio’s share jumped last year as local dealers were investing more into marketing, likely seeing radio as a cheaper add-on to their digital spending than what local television stations demand. NADA says radio captured a 9.5% share of the total spent – or $845.5 million. The data suggests the 2022 dip for radio, when its share slid to 7.8%, was an anomaly, with the 2023 figure returning to a pre-pandemic standard of about ten percent of dealer dollars earmarked for radio.

The data also shows that some local car dealers are still spending with their local newspapers. NADA calculates about two percent of total ad dollars went to newspaper, with five percent spent on direct mail campaigns.

NADA estimates the typical new car dealership spent $528,923 on advertising last year. Radio’s share of that total averaged $50,248 – up from $39,730 in 2022. And it is not far behind the $52,892 spent on local TV. Radio also receives about twice what is spent on direct mail campaigns by local dealers, and nearly five-times what is spent on local newspaper advertising.

NADA has forecast that new light vehicles sales will increase three percent in 2024 versus a year ago, which Manzi says is a result of new-vehicle shoppers having many more vehicles to choose from versus last year.

“We expect inventory to increase and then plateau in the second quarter before rising again in the fourth quarter,” he says in the latest NADA update. “Overall, with sales volumes likely rising throughout the year, our new-vehicle sales forecast is for 15.9 million units for all of 2024.”

According to J.D. Power, average incentive spending per unit totaled roughly $2,800 in March, which was an increase of two-thirds from a year ago. And the average new-vehicle transaction price was $44,186, down 3.6% versus last year.