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DATA SHOWS DEALER SALES ACTIVITY HEALTHIER WHEN THEY KEEP AD BUDGETS INTACT
By Lauren Donalson, Senior Director of National Accounts at PureCars
Although the pandemic was still a major force in the world, the automotive industry entered 2021 having rebounded from the earliest days of the shutdowns. If anything, automotive brands and dealers found themselves having to address a lack of inventory, not a lack of demand from shoppers.
Automotive marketers all over the U.S. have continuously reevaluated strategies for 2021 ad budgets. Some retailers followed the belief that they should pull back on advertising since they weren’t worried about promoting vehicles when there is a lack of inventory.
However, this has proven to cause deeper problems toward long-term customer relationships and loyalty.
If anything, those dealers who wisely shifted their advertising message have fared better than those who pulled their advertising altogether.
What we’ve learned through the pandemic It is true, hindsight is certainly 20/20. With months of inventory shortage history now in the rearview mirror, there is a lot that can be gleaned from understanding dealer ad spend patterns, especially when industry observers look at the trends of dealers who cut off ad spending compared with those that did not.
Simply put, the data suggests dealers who continued to spend on ad strategies grew their market share, and those who cut their ad spending lost sales. This data insight also includes ad spending strategies this past summer that may have been altered as a result of the ongoing microchip shortage that saw fewer new cars and trucks hitting dealer lots.
Reduced ad budgets equal larger sales drop-off Unfortunately for those dealers who pulled back on ad spending, they ended up feeling more pain in overall sales dropoff compared with dealers who modified advertising messages and strategies and increased budgets. For example, between the months of March and August earlier this year, dealers who decreased their advertising spending between 50% and 89% saw their sales volume drop by 28%. However, those dealers who actually increased their advertising spend by just 9% during the same time period saw a much lighter drop in sales at just 9%, according to PureCars dealership advertising spending data from September.
The main difference in philosophy is what limited the drop off in sales performance. Dealers who pulled back in advertising looked at their showroom traffic in relation to lower inventory levels and thought there was no need to promote deals on new cars and trucks.
However, savvy dealers looked at this past summer as an opportunity to make varying levels of budget increases in their spending. What’s more, they realized promoting vehicles that may or may not be on the lot was not the right thing for their customers. Instead, they modified their advertising messages and instead focused on promoting vehicle buy-back opportunities to increase inventory, and they also promoted service and repair options to boost revenue further.
When customers come in for service and repair it gives dealers and their staff an excellent chance to discuss buy-back options with customers who give strong consideration to increased trade value and a discussion on other inventory on the lot. n
HONORING WSIADA PAST PRESIDENTS
2018 – 2021: AJ Hamedian, Excellent Choice
Auto Sales 2017 – 2018: Mo Aliabadi, South Tacoma Auto 2015 – 2016: J.T. Curry, Motors Northwest 2012 – 2013: Mo Aliabadi, South Tacoma Auto 2011 – 2012: Robert Reid, Reid & Johnson Motors 2009 – 2011: Bill Heald, Maple Leaf Motors 2008 – 2009: Danny Archibald, 2006 – 2008: Ken Williamson, John’s Auto Mart 2005 – 2006: John Zuckerman, Aurora
Classic Coaches 2004 – 2005: Bill Heald, Maple Leaf Motors 2003 – 2004: David Randall, Archibalds 2002 – 2003: John Zuckerman, Aurora
Classic Coaches 2001 – 2002: Art Manger, I-Deal Auto Sales 2000 – 2001: Pat Feutz, Gene Pankey Motor Co. 1999 – 2000: Mike Van Dinter, A-1 Auto Sales 1998 – 1999: Don Castle, I-Deal Auto Sales 1997 – 1998: Robert Reid, Reid & Johnson Motors 1996 – 1997: Emil Scarsella, Town & Country
Auto Sales 1994 – 1996: Jack Morris, Greg Morris Co. 1992 – 1994: John St. Laurent, St. Laurent Motors 1990 – 1992: Dave Kuper, D.K.’s Motor Co. 1989 – 1990: Jim Holder, Al’s Used Cars 1988 – 1989: Ray Harley, Ray’s Auto Sales 1987 – 1988: Greg Morris, Greg Morris Co. 1986 – 1987: Ray Harley, Ray’s Auto Sales 1985 – 1986: Gary Giacomini, Gary’s Fine Cars 1983 – 1985: Irv Rohrich, Rohrich Chevrolane 1982 – 1983: Bill Newton, Purple Key Motors 1981 – 1982: Gene Pankey,
Gene Pankey Motors Co. 1980 – 1981: Frank Granat, Aurora Car Mart 1978 – 1980: Howard “Mac” Ruddell,
Ruddell Auto Sales 1976 – 1978: Bill Newton, Purple Key Motors 1975 – 1976: Bob Ochsner, Bob Ochsner Cars 1974 – 1975: Walt Friel, Summit Motors 1973 – 1974: Don Stephens 1972 – 1973: Dick Giovi 1971 – 1972: Howard Vande Kieft 1970 – 1971: Carl North 1969 – 1970: Allan Barry 1968 – 1969: Joe Rodgers 1967 – 1968: Eddie Bawyn 1965 – 1967: Ralph Look 1964 – 1965: Dick Wyman 1963 – 1964: Archi Caraway 1962 – 1963: Chuck Suvan 1961 – 1962: Roger Tallakson 1960 – 1961: D.L. Burd 1959 – 1960: Bill DeRango 1958 – 1959: Morrie Stotsenberg 1957 – 1958: Bill Deupree 1955 – 1957: Don Medley
Vehicles Hard to Get, But Auto Financing Isn’t
BY STEVE FINLAY
Automotive consumers currently may struggle to find the vehicle they want at a decent price amid an inventory shortage. But obtaining auto financing is a cinch today for most people.
“Availability of funds is higher now,” says Andy Mayers, whose duties at Cox Automotive include serving as the company’s lender solutions strategist. “It’s easier for people to get credit.”
That’s somewhat mollifying for today’s inmarket car consumers who face an inventory dearth caused by a global microchip shortage. It has resulted in automakers cutting production and dealers raising prices as demand outpaces supply.
“The higher prices haven’t affected the availability of credit,” Mayers tells WardsAuto.
Because the product shortage has hampered vehicle sales, there are fewer auto loans these days. But the amount of money lent typically is higher than before, “a $43,000 loan vs. a $34,000 loan,” Mayers cites as an example.
The scarcity of dealer lot stock has hit automakers’ financing arms more than other lenders. “It’s been a negative for the captives,” Mayers says. Credit unions, on the other hand, “are capturing more business.”
His work entails tracking lending trends, particularly as technology plays a greater role in the credit-driven automotive marketplace.
For instance, technology now allows lenders to respond to a credit application by providing a “menu” of term options depending on different deal structure scenarios, such as down payment amount and loan-to-value, or how much money a car buyer wants advanced in relation to the price of the vehicle. basically a ‘grid’ and eliminates the need to resubmit loan applications” if the original submission requires amending.
Another digital trend Mayers cites: Online auto shoppers now can readily upload and send so-called loan stipulations such as a driver’s license, proof of employment and W-2 forms.
It’s not particularly hard to forge a pay stub, but technology allows lenders to better verify stipulation information such as income.
“Say that someone applying for a loan is a truck driver living in a particular area,” Mayers says. “The technology can match the demographics, such as job-related income levels for people living in specific geographical areas.”
When applying for auto loans, some people exaggerate their income and job titles to enhance the chances of credit approval. The auto-financing world is full of stories about that, such as a cook claiming to be a chef.
But conversely, many consumers tend to under-report their earnings, especially if they are in higher income brackets, Mayers says. “Their thinking is, ‘That’s enough information for me to give.’” Another trend Mayers notes is the overall increased popularity of digital auto retailing. It gained traction during the height of the COVID pandemic.
Cox Automotive says its data indicates dealers who offer flexible digital experiences are five times more likely to get a shopper’s lead submission, experience a 46% higher close rate than from other lead sources, and earn 24% higher gross profit per deal. Consumer satisfaction with car buying has increased with digitization, reaching an alltime high of 72% in 2021, up from 60% in 2019, according to a Cox Automotive study. Most auto consumers follow a hybrid
approach that consists of both online shopping and in-store visits.
But Mayers foresees a day when A-to-Z online auto buying, including digital contracting, becomes commonplace. He notes several Cox Automotive units, such as Dealertrack, are working toward that.
It includes what he calls a “lights-out” lending process. “That means everything is in order and all the work is done when the contract package is received.”
Comparing complete digital auto retailing and lending to autonomous-vehicle development, he says, “We’re not at level 5 yet,” the industry-designated point at which a vehicle totally drives itself. n
