The Q3 2024 Cox Automotive Dealer Sentiment Index (CADSI) shows automobile dealers in the U.S. continue to view the market as weak. The overall Q3 market sentiment index dropped to a score of 40, down from 42 in Q2 and 45 from a year ago, signaling a weakened market sentiment.
“For more than two years now, after reaching peak profits in 2021, U.S. automobile dealers have viewed the overall market as weak,” said Jonathan Smoke, chief economist at Cox Automotive. “The retail auto business today is working through a lot of uncertainty, with the coming national election front and center, and also expectations of shifting market dynamics. U.S. dealers are feeling the effects of these dynamics in the market today and their expectations for the future.”
Franchised Dealers Show Slightly Optimistic Outlook, but Independent Dealers Struggle
Franchised dealers’ sentiment increased by one point from Q2 to a score of 50 in Q3. However, independent dealers expressed a very negative outlook, achieving a score of 37, the second lowest in the survey’s history, behind only the score of 17 recorded during the global economic shutdown in Q2 2020. In the Q3 report, independent dealers showed a particularly pessimistic view on almost every aspect of the market, which dragged down the overall sentiment scores.
Market Outlooks Cool Amid Political Uncertainty and Economic Challenges
The market outlook index – which asks dealers about market expectations three months from now –dropped further in Q3, falling to 42 from 44, and remains below the year-ago level of 45. The score of 42 suggests a majority of U.S. auto dealers expect the auto market to weaken in the coming three months, not strengthen. Franchised dealers, who are historically more optimistic in their market outlook index, had an index score of 49 in the latest survey, marking just the third time in survey history – dating back to 2018 – that franchised dealers posted a market outlook index score below 50. For independent dealers, the market outlook score in Q3 was 39, down from 41 in Q2.
Top Factors | Overall Rank | Q3 2024 Percentages | Q3 2023 Percentages |
|---|---|---|---|
Economy | 1 | 61% | 57% |
Interest Rates | 2 | 59% | 59% |
When asked, 44% of dealers noted Political Climate was a factor holding back business, up from 36% in Q2 and 27% one year ago. The 44% in Q3 is the highest percentage recorded for Political Climate since the factor was added in 2019. Franchised dealers are particularly concerned about how the Political Climate is impacting their business, with 49% noting it is a factor holding them back.
Market Conditions and Expenses rounded out the Top Five factors holding back business in Q3. Additionally, Credit Availability for Consumers continues to be a notable factor holding back business, especially for independent dealers.
Limited Inventory, once the top factor holding back business, continues to fall down the list. Limited Inventory was the No. 8 factor holding back business in Q3, falling from No. 7 last quarter. Limited Inventory is a far greater issue for independent dealers than franchised dealers. In Q3, 34% of independent dealers noted Limited Inventory was holding back business, while only 16% of franchised dealers cited Limited Inventory as an issue.
Usedcars.com Dealer Sentiment Index Methodology
Derived from a quarterly survey that Cox Automotive issues to a representative sample of franchised and independent auto dealers from around the country, the Dealer Sentiment Index measures dealer perceptions of current retail auto sales and sales expectations for the next three months as “strong,” “average,” or “weak.” The survey also asks dealers to rate new-car sales and used-car sales separately, along with various key drivers, including consumer traffic. Responses are used to calculate an index by which any number over 50 indicates that more dealers view conditions as strong rather than weak. The Q3 2024 CADSI is based on 933 U.S. auto dealer respondents, comprising 536 franchised dealers and 397 independents. The survey was conducted from July 23 to August 7, 2024.