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Used Car Advertisers Respond to a New Market

Used Car Advertisers Respond to a New Market

The COVID‐19 pandemic caused many industries to suffer as consumers dealt with tight budgets and changed lifestyles. Those same factors, though, led to a boom in the used car market—and modifications in the industry’s advertising practices.

Read on to learn more about how the used car market changed and how this affected advertising.

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Used Car Industry Thrives Even As Finances Tighten

Dealerships across the country began to offer digital car buying during the pandemic—and this trend is expected to endure long after the pandemic is over.

“It has been incredible to witness an industry as large and established as automotive respond with new technology and adopt new processes to ensure a safe and frictionless car-buying experience.” says Alex Vetter, President and CEO of Cars.com. 

Vetter and Cars.com saw a 63% increase in the number of online car shoppers during the first three months of the pandemic as shoppers heeded stay‐at‐home orders and social distancing advice. 

At the same time, they saw a rise in at‐home test driving and the use of AI‐powered customer service chatbots. Used car buyers, it appears, sought convenience and safety.

“It’s insane. To me it’s inexplicable,” says Val Ranguelov, the principal dealer at Bul Auto Sales & Service. “It’s totally the opposite effect a pandemic should have had on the situation.”

Ranguelov’s dealership has seen a 50% increase in used car sales.

Experts cite an aversion to public transportation, as well as tight budgets, as some of the driving factors behind the industry’s success over the past few months.

Demand Exceeds Supply as the World Changes Due to COVID‐19

“The used market is experiencing a dramatic recovery: used vehicles were sitting almost untouched at the start of the pandemic, and now they’re practically flying off dealer lots,” said Jessica Caldwell, executive director of insights for Edmunds.com.

Edmunds reported a 16.4% increase in the average price of used cars between June and July of this year, saying that competition caused higher prices within the market.

While many buyers seek used cars to fit newly‐shrinking budgets, the industry is also benefitting from a lack of new car options for car buyers. While most automakers are back up and running, many shut down entirely near the beginning of the pandemic. Others shifted their focus to producing ventilators and other pandemic‐specific resources.

From January through July of 2020, North American automakers produced just 6.6 million new cars and light trucks—a full 3 million fewer than they did in the same period the previous year.

This shortage is driving curious car buying behavior. Some dealers report cars spending only hours on the lot before being sold. The demand is just too high for the available supply.

MediaRadar Insights: Advertising Trends in the Used Car Industry

Methodology

We analyzed all aftermarket automotive retailers year-to-date and looked at their total spending compared to the same time period last year. This analysis includes data across all media formats.

Our Findings

Overall, advertising in the used car category is down 10% YoY.  

The top advertisers—those who spent more than $15 million YTD—are Carvana, CarMax, Vroom, and DriveTime.

Used Car Advertising By Format 

While the overall market is down 10%, the decrease is divided differently by media format. 

Here’s a snapshot:

  • Television: -18% YoY
  • Digital: +641% 
  • Print: +27%

The percentages give us one picture—but looking at dollar spend and timing give us a deeper understanding of current ad trends in this market.

Television

Television ad spend dropped from $155 million in 2019 to $126 million in 2020. Over the last ten weeks, television ad spend was down an average of 48% YoY. However, this is much improved from earlier in the year. The largest dip in spend occurred at the end of March, where it fell 91% from $2.5 million to $235 thousand.

Digital

Dollar for dollar, digital ad spend is not compensating for the decline in television spend, but is bolstering the overall category. Spending increased from $1.9 million in 2019 to $14.2 million in 2020. It’s also noteworthy that the number of digital advertisers increased by 132% YoY. 

This is not surprising as used car dealerships started offering online shopping and delivery. 

Plus, this follows a general shift towards digital advertising this year. Amid the pandemic, consumer attention largely shifted to mobile devices. Advertisers across retail categories, including used cars, followed.

Print

Though not as significant as digital, print spending increased from $1.8 million in 2019 to $2.3mm in 2020. This is driven by a large spike at the beginning of the year, rather than a large increase amid the pandemic. 

Over the last ten weeks, ad spending in print has returned to levels consistent with 2019. During this time period, spend is slightly down (by 6% YoY).

The effects of the pandemic are clear in used car ad creative. Ad copy from some of the top advertisers is tailored to those who are strapped for cash or those who are looking to order a car online.

At the beginning of 2020, we wouldn’t have expected the used car market to take off or market itself based on its ‘touchless delivery’ options. ‘Touchless’ delivery may fade after a vaccine is developed, however digital sales and advertising will probably stay strong. 

As consumer industries change or return back to normal, we’ll continue to share noteworthy highlights and trends.

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.