Atlanta, September 8, 2023 – Overall U.S. dealer sentiment in the third quarter of 2023 was about the same as in the second quarter, as high interest rates and economic concerns weigh on the U.S. auto market, according to the Cox Automobile Dealer Sentiment Index (CADSI). It was stable.
The current market index for the third quarter is 45, still below the benchmark of 50. This indicates that more dealers see the current car market as weak than strong. After hitting an all-time high of 67 in the second quarter of 2021, the market index is currently on a downward trend. The third quarter report is 5.th Dealer sentiment has fallen below the 50 mark for consecutive quarters. Importantly, franchise dealers are much 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 decreased by 1 point to 41.
The three-month market outlook index for the third quarter fell from 47 to 45, indicating that more dealers feel the market is weak rather than strong in the coming months. Similar to the current market index, franchise dealers were more optimistic about the outlook than independent dealers. The Franchise Dealer Market Outlook Index for the third quarter rose one point to 58 from 57. The independent dealer outlook index fell to 41 from 44.
“The latest indicators show that continued high interest rates and persistent concerns about economic and market conditions are dampening overall dealer sentiment,” said Jonathan Smoak, chief economist at Cox Automotive. “While franchise dealers are more optimistic, independent dealers are less hopeful due to affordability issues that are more acutely impacting the used car market and their business.”
Although the majority of dealers expect the market to be weak in the coming months, the latest survey shows that little has changed significantly from the second quarter, with the U.S. auto market remaining relatively balanced and consistent from the previous quarter. It shows that The traffic index was down slightly from the previous quarter, and the profit index was down 1 point from 41 to 40. The overall profit index hit an all-time high of 60 in the third quarter of 2021 two years ago and has fallen since then. The current profit index is 40, the lowest level since the pandemic. While profits for franchised dealers remain well above pre-pandemic norms at $58, that is not the case for independent dealers. The Independent Dealer Profit Index is 35, near its lowest score ever and well below its long-term average.
Interest rates and the economy continue to weigh on dealers.
According to CADSI for Q3 2023, interest rates, the overall economy and market conditions are weighing on dealers. The majority of dealers see costs increasing, and as mentioned above, dealers agree that profits continue to decline and are significantly lower than a year ago. After reaching new highs in late 2021, profit index scores were similar to pre-pandemic norms and remained strong through early 2022.
New car sales environment improves, but used car sentiment declines
The new vehicle sales environment rose one point to 59 in the third quarter due to increased inventory levels. A score above 50 means more dealers believe the sales environment is favorable. The index score is up from 51 a year ago and is now higher than many pre-pandemic measures.
Conversely, the used car sales environment is still considered poor by most auto dealers in the United States. The used car sales environment index score rose from 42 to 44 in the third quarter, but is still below the 47 recorded in the previous year. Independent dealers continue to view the used car sales environment as particularly poor, with their Independent Dealer Index score increasing three points to 40. Franchise dealers were more positive about the used car market, with a score of 58. Both scores are significantly lower. pre-pandemic levels.
Electric vehicle sales index declines for franchised and independent dealers
Compared to a year ago, electric vehicle (EV) sales are seen to have worsened at both franchised and independent dealerships, although the change is not statistically significant. The EV Sales Index score for franchised dealers this quarter was 54, down 2 points from a year ago and the third consecutive quarter of decline since peaking at 61 in the fourth quarter of 2022. Independent dealers indicate EV sales are slightly worse than a year ago.
When asked about future EV sales forecasts (three months ahead), dealers’ views declined, with an index score of 47. The index score for EV sales expectations for both franchised and independent dealers was the lowest since Q2 2021. Added a question regarding expectations for the EV market.
“Dealers recognize that this is not an easy road forward in the short term, especially for some brands,” Smoak notes. “But the pressure dealers are feeling is due to oversupply rather than lack of demand. I expect this to be a natural speed bump and part of growth. The biggest issue for consumers is Price is also a barrier to considering electric vehicles. As an economist, I’m pretty sure excess inventory and increased competition will eventually drive prices down, which will help EV consideration and adoption. We can predict with confidence.”
Interest rates and the economy are the biggest factors hindering business
According to the third quarter CADSI, interest rates (61%), the economy (54%) and market conditions (41%) are the top factors inhibiting business. Limited stock (37%) dropped him to fourth place.
Main factors hindering business | Overall ranking | 3rd quarter 2023 percentage | 3rd quarter 2022 percentage |
Interest level | 1 | 61% | 35% |
economy | 2 | 54% | 53% |
market conditions | 3 | 41% | 48% |
Limited stock available | Four | 37% | 56% |
Credit available to consumers | Five | 33% | 18% |
In the third quarter, consumer credit availability (33%) increased significantly year over year, which was a constraint on the business. In our Q3 survey, 33% of dealers said credit availability was a challenge, up from 30% in Q2 2022 and just 18% in Q3.
Cox Auto Dealer Sentiment Index Methodology
The Q3 2023 CADSI is based on respondents from 983 U.S. auto dealers, including 554 franchised dealers and 429 independent dealers. This study was conducted from July 24 to August 8, 2023. Dealer responses were weighted by dealer type and sales volume to represent the national dealer population.
For each aspect of the market surveyed, respondents are given options relating to strong/increasing, average/stable, or weak/decreasing, with an opt-out of “don’t know.” The index is calculated by creating an average score of:
- Strong/increasing answers are assigned a value of 100.
- Average/stable answers are assigned a value of 50.
- Weak/degrading selections are assigned a value of 0.
Respondents who select “don’t know” for a particular question are excluded from the calculation of the relevant index. The total metrics reported have a margin of error of +/- 3.1%.
About Cox Automotive
Cox Automotive is the world’s largest automotive service and technology provider. Cox Automotive leverages the breadth of its proprietary data, powered by 2.3 billion annual online interactions, to customize cutting-edge solutions for car buyers, automakers, dealers, retailers, financiers, and fleet owners. Masu. The company has more than 25,000 employees on five continents and includes trusted brands such as Autotrader®, Dealertrack®, Kelley BlueBook®, Manheim®, NextGear Capital™ and vAuto®. Cox Automotive is a subsidiary of Cox Enterprises Inc., a privately held Atlanta-based company with $22 billion in annual sales. Visit coxautoinc.com or connect via@CoxAutomotive CoxAutoInc on Twitter, CoxAutoInc on Facebook or Cox-Automotive-Inc. on LinkedIn.
Media contact:
Mark Schirmer
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mark.schirmer@coxautoinc.com
Dara Hales
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