Dealer Sentiment Still Weak

By Staff Writer September 11, 2023

Overall dealer sentiment in the U.S. held mostly steady in Q3 2023 compared to Q2, as high interest rates and economic concerns weigh heavily on the U.S. auto market, according to the Cox Automotive Dealer Sentiment Index.

The Q3 current market index was 45, still below the threshold of 50, indicating that more dealers see the current auto market as weak than see the market as strong. After hitting an all-time high in Q2 2021 of 67, the current market index has been sliding downward. The Q3 report is the 5th consecutive quarter with dealer sentiment below the 50 threshold. Importantly, franchised dealers are far more positive about the current market than independent dealers, with a current market index score of 57, up one point from last quarter. For independent dealers, the current market index fell one point to 41.

The 3-month market outlook index declined in Q3, falling from 47 to 45, indicating more dealers feel the market will be weak, not strong, in the months ahead. As with the current market index, franchised dealers were more optimistic about the outlook than independent dealers. The market outlook index in Q3 for franchised dealers increased 1 point, moving from 57 to 58; the outlook index for independent dealers declined from 44 to 41.

“The latest index indicates that persistently high interest rates and lingering concerns about the economy and market conditions are dampening overall dealer sentiment,” said Cox Automotive Chief Economist Jonathan Smoke. “Franchised dealer optimism is on the rise, whereas independents are less hopeful due to affordability issues that more acutely affect the used-vehicle market and their businesses.”

While a majority of dealers believe the market will be weak in the coming months, few factors in the latest survey changed significantly from Q2, indicating the U.S. auto market is relatively balanced and consistent from last quarter. The traffic index declined only slightly from last quarter and the profits index fell one point, from 41 to 40. The overall profits index hit an all-time high two years ago, at 60 in Q3 2021, and has been sliding ever since. The current profits index, at 40, is now at a post-pandemic low. For franchised dealers, profits are still well above pre-pandemic norms at 58. Not so with independent dealers. The profits index for independent dealers at 35 is near the lowest score ever, and well below long-term averages.

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Last modified on Friday, 15 September 2023 12:16