Car dealership forecasting for 2021
The auto industry had its weakest year in close to a decade in 2020. Due to the COVID-19 pandemic, buyers stayed away from dealerships which, in turn, forced companies to close factories for a few months last spring.
However, auto executives and analysts are cautiously optimistic that vehicle sales in the U.S. will begin to return to some semblance of normalcy in 2021. If the new administration can speed up the distribution of the vaccines and begin to stabilize the economy, sales will show strong growth in the second half of the year. Car dealership forecasting has new vehicle sales ranging from approximately 15.5 million to 16 million, an increase of between 7.6% and 10.3% when compared with 2020.
Planning for dealerships should involve taking a proactive approach to sales and marketing efforts as will as considering year-end planning strategies for taxes.
Faced with tightening margins, low vehicle inventories, and a narrowing window of opportunity to rebound from 2020, automobile dealers are searching for ways to maximize their profitability as much as possible. There will be opportunities for car dealerships in 2021 to build sustainable growth which could ultimately lead to long-term success. However, dealerships have to adapt their sales and creative marketing processes to meet the demands of new consumers, delivering the experience that the prospective buyer wants.
The digital shift to buying, selling, and financing cars accelerated in 2020 due to the pandemic, and customers have really taken to it. In fact, many dealers believe that digital will account for more than half their sales within three years. Dealers can offer special incentives to online buyers such as at-home test drives, sales consultation, final delivery, and concierge maintenance and repair.
Consumers will be looking for deals on vehicles in the new year and, with the help of low APR programs, dealerships will be able to offer attractive rates and payments to prospective buyers.
Post COVID is coming
The pandemic forced dealerships to develop a new mindset; they had to quickly revamp their entire sales operations, turning toward digital retailing. As vaccination rates improve across the country and the country begins to enter a period of economic recovery, the job market will begin to improve as will consumer confidence, resulting in an increase in car sales as the year progresses.
While the past year was unique due to low inventory, which translated into higher prices for a new car, dealers are going to need to focus on digitization and providing a more personalized experience for their customers, whether the customer starts shopping online or in the showroom, even after COVID-19 is over.
As dealerships look ahead to a post-COVID future, they can expect some uncertainty to continue, but by planning now, they will be better prepared to navigate the changes and come out on top in 2021.
GYL CPAs and Advisors can help you respond to the challenges that your dealership faces now and in the future. Our specialists provide a wide range of automobile dealership accounting services to help protect your assets, identify opportunities for growth, and present tax strategies.