COVID-19 Business Losses & Car Dealerships

Millions of California residents rely on cars as their primary form of transportation. As of 2018, over 15 million vehicles were registered in California and with all those cars on the road, it’s only a matter of time before people need to trade their cars in for new ones. But for many people, the coronavirus pandemic disrupted their plans for buying a new car. 

At the height of the coronavirus pandemic, car sales famously plummeted. Car sales nationwide had already been on a downward trend in the past couple of years and the coronavirus pandemic brought them to a nearly complete stop. Not only were sales departments of dealerships forced to temporarily close because of mandated shelter-in-place orders, but the massive job losses caused by the pandemic made many people unable to make planned car purchases.

How COVID-19 Impacted California Car Dealerships

When the sales departments of car dealerships were forced to temporarily shut down during the pandemic, many dealerships suddenly needed to start expanding their capabilities for online sales. But even with an expansion of online car sales, those sales numbers were typically substantially less than what their typical sales numbers would be. 

The Los Angeles Times reported that out of 322 dealers who responded to a March 30 survey by the California dealers group, 130 of them said they would only be able to maintain operations for 1-3 months at their sales levels at that time. With car sales so low during this time, the Los Angeles Times also reported that some dealerships in Southern California were advertising cars for 3%-5% below sticker price. At some dealerships, cars were being sold at a loss because some revenue is better than none.

Service departments can also generate a lot of revenue for car dealerships, but even though auto repairs were allowed to continue during the shutdowns, business was often slow. If people had cars that were due for some routine maintenance or repairs, many of them decided to postpone that work for the sake of avoiding in-person interactions. And with people doing less driving, repair work suddenly became a lower priority.

Some early trends indicate that many people are eager to return to car dealerships, but as car sales resume, those who were looking to buy may decide to postpone their purchase if they had their heart set on buying or leasing the latest model of a car. Typically, car dealerships expect to start receiving shipments of new model year vehicles late in the summer. But because of the pandemic, many manufacturing plants were forced to temporarily shut down, forcing automakers to push back release dates for their 2021 vehicle models. Even if cars are manufactured in the United States, they may be made with parts manufactured in other countries and pandemic-related factory shutdowns in other countries may have contributed to production delays elsewhere. Some of those delays include the new models of several vehicles that are extremely popular with consumers. 

Business Interruption Insurance & Car Dealerships

There are many different reasons why a car dealership might have to temporarily close down, such as a natural disaster, a fire, or a power outage. But even a temporary closure that lasts for a day or two can result in major financial losses. Not only is there lost revenue to worry about, an extended closure can leave dealership owners worrying about being able to meet employee payroll, pay utility bills, or keep up with their business loans. 

To prepare for the unexpected, many business owners purchase business insurance policies that include business interruption and/or civil authority coverage. These types of coverage are specifically intended to help cover the monetary losses associated with temporary closures. But with the sheer volume of claims being made for business interruption and civil authority insurance benefits, insurance carriers are quickly denying virtually all of the claims they receive. Some insurers have been trying to discourage policyholders from even making a claim for business interruption benefits. 

Help for California Car Dealership Owners

Dealing with insurance companies can be very complicated. They will look for any reason at all to deny claims, even when those claims are valid. If you’ve made a claim for business interruption insurance benefits and been denied, you are definitely not alone. The Wallace Firm is now working with California business owners to help them with their business interruption insurance claims. 

Whether you’ve made a claim and been denied or are in the process of getting ready to make a claim, we can help you through the process so that you can focus on getting your business back on track. These cases are being handled on a contingency basis, so you won’t be charged any fees unless we help you get results. Contact us today for help with your case.