New auto sales, a key indicator of the U.S. economy and one of radio’s largest ad spending categories, continued to improve in June, coming close to JD Power’s pre-coronavirus forecast. For the week ending June 21, sales were just 6% below the pre-virus forecast. New car sales bottomed out in late March as many parts of the U.S. went into lockdown mode and dealerships were forced to close, apart from service departments. For the week ending March 29, sales plunged 59% below J.D. Power’s pre-virus forecast. While sales improved in April, they were still 38% below the pre-COVID forecast at month’s end. In May the market moved into the -24% range and sales got significantly stronger in June.
One reason for the turnaround was automotive brands running incentives like zero-percent financing and deferred payments. That was fine when inventory levels were plentiful, resulting in a slow but certain rise in sales through April and May. But as sales rose, inventory and incentive volume fell.
Auto manufacturers kept customer incentives at high levels through May at $4,900 to $5,000 a vehicle. But incentives fell in June and are now creeping back towards pre-COVID levels. New vehicle incentives per unit were $4,300 for the week ending June 21, approaching the $4,000 pre-COVID level on March 8.
J.D. Power data shows premium vehicle sales are roaring back, 8% higher than the pre-COVID forecast for the week ending June 21 with an average transaction price of $49,900.
In addition, dealers’ willingness to adopt online sales infrastructure has made it possible for consumers to shop — and configure price and payment terms — before even getting to a dealership.
The data shows the used car market recovered faster than the new vehicle market. Used car sales blew past their pre-COVID forecasts in early June and were 14% higher than the forecast for the week ending June 21. That’s the third consecutive week used auto sales exceeded the forecast by double digits.
“Our used sales have exploded,” Doug Waikem, owner of six new-car franchises in Massillon, OH, told The New York Times. “A $10,000 to $14,000 used car is gold.”
With auto sales continuing to recover, BIA estimates total automotive spend on local ads to reach $13.9 billion in 2020. More than half of that (52%) will go to traditional media with 48% allocated to digital. But the scales will tip in the other direction in two years with digital getting the edge (50.9%) compared to 49.1% for traditional in media in 2022.
Compared to its original estimates, BIA’s post-COVID forecast reveals auto ad spending is down 11.8% across all media platforms. The good news for radio? Auto spending on online radio is forecast to jump 9.2% to nearly $200 million in 2020, up from $183 million in 2019. That makes it the second fastest growing digital ad platform for auto dollars.