Wow, what a year it’s been so far in 2020. Entering the year, sales of new vehicles were projected to hover near the 17 million mark, consistent with the annual sales pace over the previous five-to-six years. Growth was no longer the best word used to describe the auto industry for dealers, but the projections represented a still healthy industry.

Fast-forward six months and the reality has changed drastically. 

According to the mid-year data1, auto sales declined 33% during the second quarter, illustrating in some cases the deep cuts made from waning consumer demand due to the COVID-19 pandemic. The drop in sales ranged from 25% to 50% depending on states’ differing approach to stay-at-home orders and when they began to reopen.

Are Consumers Looking at New or Used at Dealerships?

Early in the pandemic, payment deferrals and zero-percent interest incentives were plentiful on new vehicle deals, with some spectacular offers that helped to prevent deeper cuts in new sales. However, as states began to reopen in May and June, more consumers went back into the dealer showrooms and the demand for used cars increased. Zero-percent deals are still thriving, as automotive data firm Edmunds.com reported that these deals represented 19.4% of all new financed transactions in June2.

Dealership advertising spend has also rebounded as the COVID-19 pandemic continues in the summer months. In fact, the average dealership advertising spend was up 18% when comparing the week of June 21 against the week of March 29. Furthermore, dealership advertising during the first week of July was up 31% for new vehicles, 25% for used vehicles, and 11% for fixed ops and service3. 

This early summertime push further drained inventories, particularly as manufacturing plants halted production in the spring because of the pandemic. Edmunds.com also reported that new-car supplies at the beginning of June were down by a third, compared to a year earlier. What happened to the days of just worrying about what to stock and how to price? 

Top-Selling Makes & Models WoW During July 4th

Analyzing the top-selling makes and models in early July - compared to the final week of June - there was a nearly even mix of used versus new, with used taking a slight edge. It was also mostly split between trucks, crossovers, and sedans, with today’s popular models continuing to drive much of this demand.

Supplies Will Drive Near-Term Trends

All that being said, sure there will continue to be a push for new sales, but this may be volatile in the coming weeks and months. And while used car prices are up there is nearly an unlimited supply, which means dealers aren’t stuck on new offers only, and dealers can sell used fast increasing the appeal of those deals.

Looking ahead, dealers will have several industry trends that determine what is moving off the lots. On one hand, still-short supplies of new vehicles may persuade consumers to take a closer look at used inventory, especially as more leases are returned and filling out CPO options. However, as this consumer demand continues to rise, it has also caused used vehicle prices to rise, pushing some consumers back toward new options.

Price increases are already beginning to be felt throughout the country. Transaction prices in June were reportedly expected to rise by 3.9% to $34,981, the highest level ever reported for June4. 

Nobody has a crystal ball, but dealers need to focus on what’s in their control. Dominate used vehicle sales and focus significantly on fixed ops and service.

Where Do Dealers Go Heading into Fall?

Dealers should remain focused on several strategies throughout summer, beginning with their need to lead with actionable, real-time data to guide them on the right inventory and transaction decisions. They should also shorten their decision cycles down to hours, rather than days. They may also want to determine where it’s best to focus on used/CPO through dynamic search, social marketing, and retargeting advertising strategies. Additionally, they should also focus on fixed ops as a profit center, and all advertising should be optimized by channel and ROI, including social media messages (including video) for best engagement levels.

Employing these strategies will help every dealer maximize every opportunity as we head into a fall season that’s looking to be as unpredictable and unprecedented as what we’ve experienced so far in 2020.

1: https://www.autonews.com/sales/cloudy-outlook-q2-sales-fall-33?utm_source=us-sales-report&utm_medium=email&utm_campaign=20200709&utm_content=article2-headline

2: https://www.cnbc.com/2020/07/03/how-to-shop-for-car-deals-during-4th-of-july-sales.html 

3: PureCars dealership advertising data trends