The National Auto Dealers Association’s (NADA) annual report detailing how local auto and truck dealerships made and spent their money shows that they invested $942 million on radio last year, accounting for 10.1% of their total spend. That’s the same share as a year earlier, as indicators suggest that a shift of dollars to digital media may be plateauing.
What are known in auto advertising circles as “Tier 3” clients—the local dealers—have long been more faithful to radio than manufacturers (Tier 1) or regional associations (Tier 2). Last year that meant the average local dealership spent $56,820 on radio, per NADA. That’s roughly on par with what they spent on the medium in 2017. The high point for radio came in 2015 when the per-dealer average hit $86,170 as new car and truck sales set all-time records.
The report shows the typical dealer spent a total of $562,575 on advertising overall last year. The biggest portion of that went to digital media. But in what may be the first inkling that dealers have reached their limit with online advertising, there was a slight pullback last year. NADA says the average dealer spent $316,730 on digital advertising in 2018. That was about $5,000 less than what they spent online in 2017. Even so, digital now controls a majority (56%) of local dealer marketing dollars.
Television, which has experienced a bigger hit than radio to fund those online ad buys, nabbed 18% of local dealer ad budgets last year. Yet that too may be a signal of a slowing of digital’s growth since TV’s share actually went up from 15% in the prior year. The remainder of dealer ad dollars went to direct mail, which captured a 7% share, and newspapers, which had 6%. Like radio, both of those print formats saw their shares hold steady.
Local dealers have been racing to adjust to a changing auto business. After the ranks of dealers shrank in recent years, impacting the number of clients for radio reps to call on, there is good news on that front. NADA says there were 16,753 franchised dealers in the U.S. in 2018. That’s on par with the 16,802 reported in 2017.
Overall, local dealers spent a combined $9.42 billion on advertising in 2018. That was a decline of 3.2% or $311 million compared to what they spent on marketing in 2017. But last year’s tally was still $245 million ahead of what dealers spent on marketing in 2015.
Dealers sold a combined 17.22 million new cars and light trucks last year. NADA senior economist Patrick Manzi says that means for 2018, advertising expenditure per new unit sold was $624. That’s $5 per vehicle less versus 2017. In recent years the high point was $633 on advertising for every car or truck sold. That came in 2015.
The annual report shows new car and truck sales contributed 57% of dealer revenue, with 31% coming from used vehicle sales, and 12% from the service and parts department. “As margins on the sale of a new car have fallen since the Great Recession, dealers have done an excellent job focusing on their service and parts business,” Manzi says. “Since 2009, service and parts sales in the average dealership have increased by 5.5% per year on an average annualized basis.”
NADA’s annual dealer report also reveals the average price paid for a new car hit a new high last year: $35,608. That’s up nearly $1,000 compared to 2017’s average retail price. And the average new car price has risen 15% between 2011 and 2018 according to NADA data. Used car sales averaged $20,586 last year. Prices on pre-owned vehicles have been trending up during the past decade as well, although it’s been roughly $20,000 for the past three years.