Auto Dealers Bullish on Market
Though the overall outlook rose, dealership traffic is down as affordability issues linger.
Pexels/Josh Sorenson
Political certainty following the November election put auto dealers in an optimistic frame of mind.
Though dealers’ view of the current market is muted at a low score of 43, Cox Automotive’s quarterly Dealer Sentiment Index shows a marked improvement in their three-month outlook from 42 to 54 quarter-over-quarter. A year earlier, it stood at about the same as the third quarter: 41.
The settled presidential race, along with the recent trend of moderating interest rates, bodes well for sales, dealers indicated in the Cox survey.
“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,” said Chief Economist Jonathan Smoke. “It is the best fourth quarter since 2021, which was the most profitable quarter in dealer history.”
The new-vehicle sales index also rose, from 51 to 54, while the new-vehicle inventory index stayed at a high 73, only two points under the record high achieved in the first quarter.
The outlook isn’t all rosy, though. Dealers’ take on the larger economy were flat at 41 due to inflation and still-high loan rates. And since dealer profits have come down from pandemic-era highs, Cox’s profit index rose just one point to 35.
Meanwhile, Cox’s customer traffic index fell by one point to 31, reflecting reduced in-store traffic, though digital business rose a point to 40.
While overall dealer sentiment got a boost, dealers’ outlook on electric-vehicle sales fell two points to 35. Cox’s EV tax credit index score, though, stood at 60, suggesting the federal tax credit for EV purchases and leases has increased sales. The conflicting numbers show dealers anticipate the potential loss of the credit, which the incoming Trump administration has indicated it plans to eliminate.
“We are getting clear feedback that the tax credits are working in both the new and the used markets,” Smoke said. “The numbers have been moving higher and higher for franchises and are up substantially year over year.”