by Brian Blum

Franchised American automotive dealers spent more than $7.86 billion on advertising in 2007 according to the latest report from the National Automobile Dealers Association (NADA). Ad expense in the average new-vehicle dealership rose 3.4 percent from 2006. That’s still not good news for U.S. newspapers: In the past 10 years, ad spending for print media dropped by 25 percent, from 52 percent in 1997 to 26.7 percent in 2007. 

That still puts newspapers in the No. 1 spot, but not by much. The typical dealership spent 16.6 percent of its advertising dollars on the Internet, up from 11.5 percent in 2006 and 9.9 percent in 2005.
Other ad expenditures include television (17. 4 percent), radio (16.9 percent) and direct mail (10.2 percent). Advertising per new vehicle sold ranged from $435 to $610 depending on the total number of ads being placed at once.

Other highlights from the NADA report:

  • The nation’s new-car dealers sold 16.1 million units in 2007, down slightly from the previous year’s 16.5 million units. NADA predicts 2008 will be down another 3 percent.

  • Total dealership dollar sales were up 3 percent last year to $693 billion. That allowed dealers to maintain payroll employment of 1, 114,400 people.

  • Used vehicles contributed 27 percent of operating profit in 2007, a 1.5 percent rise in transaction prices and nearly an 11.5 percent gross margin on retail selling prices.

  • 18.5 million used cars were sold in 2007 – 11.4 million retail and 7.1 million wholesale. As a source of used cars, auctions have made the biggest inroads in the past decade, from 10 percent of the dealer’s inventory in the early 1980s to 32 percent in 2007, 

  • Service and parts brought in the lion’s share of profits for dealers at 81 percent or $84 billion, a 4 percent increase from 2006.

  • Dealerships have been getting bigger. In 1988 there were 7,007 dealers with sales of less than 150 new vehicles a year. Today there are only 3,336 such stores.

  • The average selling price of a new vehicle in 2007, including accessories and options, increased by 1.2 percent from 2007 to $28,800.

  • On June 30, 2007, there were more than 248 million vehicles in operation. The median age for the car population was 9.2 years. For trucks it was 7.1 years.