The Q4 2024 Cox Automotive Dealer Sentiment Index reveals renewed optimism among U.S. automobile dealers. The latest survey, conducted immediately following the national election in early November, indicates that while current market conditions are still viewed as weak, dealers are increasingly optimistic about the future.

“The recent resolution of political uncertainty following the presidential election has cleared the path for a more optimistic outlook on future auto market conditions,” said Jonathan Smoke, chief economist at Cox Automotive. “Coupled with the potential for supportive measures such as tax rebates and the possibility of lower interest rates, dealers are feeling more hopeful about the road ahead as we move into 2025.”

The market outlook index, which measures dealers’ expectations for the auto retail market in the coming quarter, jumped to 54 in Q4 from 42 in Q3. This significant increase suggests that more dealers believe the auto market will be stronger in the next three months. One year ago, the index stood at just 41, one of the lowest readings in its history.

“We saw a surge in the outlook, technically the largest surge we have had quarterly in the history of the data, and it gets us back to Q2 2022 levels,” noted Smoke. “It is the best fourth quarter since 2021, which was the most profitable quarter in dealer history.”

Despite the positive outlook, the current market index score of 42 indicates that a majority of dealers still view the current retail auto market as weak. This score is slightly better than one year ago but remains well below pre-pandemic norms and long-term averages.

Franchised dealers, who sell both new and used automobiles, are more optimistic than used-only independent dealers, with an index score of 50. This score signals an equal number of dealers see the current market as strong as see it as weak. A majority of independent dealers indicate that the current market is weak, with a score of 39. However, this represents an improvement compared to last quarter and last year.

Profits and Costs Increase but Continue to Challenge Dealers

In Q4, the important profit index increased slightly, moving from 34 to 35. Both franchised and independent dealers noted higher profitability compared to Q3, but the index score remains well below levels seen in 2021 and 2022. The cost index also improved, falling from 77 to 71, suggesting some pressure may be easing.

Views of the U.S. economy were mostly flat in Q4 at 41, equal to the score in Q3 and two points higher than in Q4 2023. U.S. automobile dealers still see the economy as weak, a sentiment that has been consistent for the past two years due to elevated inflation and high auto loan rates.