Dealerships and Advertising

By Brendan Moore

07.07.2007

You see the ads from dealers on television, hear them on the radio, see the big ads in the weekend newspapers, and, in the past several years, you’ve seen a lot more ads from dealers on the internet. In fact, it may seem like you can’t get away from them sometimes, especially some of the more obnoxious ones. So it’s no secret that automobile dealers spend a lot of money on advertising, but how is “a lot” defined?

The National Automobile Dealers Association (NADA) says that American new-car dealers spent a combined $7.8 billion (USD) in 2006. That’s the advertising the dealers paid for; it is exclusive of the money the manufacturers spent on brand and model advertising nationally. The NADA says that’s a 2% increase from 2005 and represents an average $590 advertising cost borne by the dealer per new car sold. The average new-car dealership in the U.S. spends $364,610 on advertising for their new car sales department.

How does that break out per advertising medium? A look at the chart breaks out where the money went in 2006:

Of course, the big difference in terms of categories in recent years as opposed to even five years ago is the emergence of the internet for dealers as a viable advertising medium. Five years previous to 2006, internet advertising was a small part of “other”; now it is an integral part of the advertising strategy of most new-car dealerships. And most of that increase came at the expense of newspaper advertising. Which is why, of course, newspapers have really expanded their online advertising in order to get some of that business back.

Most industry analysts expect overall dealership advertising costs to keep rising over the next several years, with a greater percentage of that advertising migrating to the internet.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

Share This Post On

3 Comments

  1. I work at a dealership, and I appreciate you printing this. Our advertising costs per car are actually a liitle higher because we’re in one of the largest metro areas of the U.S. Customers seem to believe that a $25,000 car somehow has $5000 profit in it for the dealer to play with, and that’s not the case. A $25,000 car has about $1600 from dealer invoice to MSRP. Then things like the pre-delivery mechanical inspection done by the shop (cars are not ready to be taken for a drive as soon as they come off the carrier from the factory), the advertsing cost per vehicle, the floorplan costs, etc. Very quickly you’re down to about $800 profit on that car. And then you have a customer insisting you give him $5000 of sticker, that’s his final offer, or he’s going to walk. Because he KNOWS how to buy a new car, and cannot be pushed around. Just ask him, he’ll tell you.

  2. Hard for me to work up a lot of sympathy for dealerships concerning the negotiating tactics of consumers. Dealerships have only themselves to blame for the high level of mistrust that the public has in the new car sales process. Dealers are the ones that are constantly trying to rip customers off every way possible. The only person I trust less than a car salesman is a realtor. At least with the car salesman you know where you stand – he’s going to try and take as much of your money as he possible can.

  3. I wouldn’t have guessed it was that high per car. I wonder what it is per domestic car, Japanese car, European car, etc.? When you think about a car like a Ford Focus, which has hardly any margin between dealer cost and sticker, and then you add in the advertising cost per car, the Ford dealers are lucky to break even on the thing.

    And BTW, this may shock you, but there are some ethical dealerships and some ethical salespeople. And also, I guarantee that the average car salesman is more truthful while selling you a car than the average private seller is while selling their own car.

Submit a Comment

Your email address will not be published.