Car rates

Sentiment among car dealers falls in the third quarter on worries about the economy

Smoke noted that while the inventory situation for rare vehicles has improved, there is still a long way to go and remains challenging.

The deterioration in franchise dealer ratings for the third-quarter market bucked a common seasonal trend, according to Smoke. Excitement over the new model year tends to cause franchisees to view third-quarter terms more favorably, but that wasn’t the case this year, he said.

The industry as a whole, franchise and independent dealerships, marked the third-quarter market in negative territory at 45 out of 100 on the Cox Index, which Smoke described as “an ominous signal.”

Cox surveyed 574 franchise dealers and 466 independents between July 26 and August 9 to calculate the latest quarterly index. In addition to asking dealers for their outlook for the next three months, the company asks questions about the past 90 days and identifies factors affecting dealer optimism or pessimism. Cox weights responses by dealership type and sales volume to calculate a spread index. An index above 50 indicates that dealers view the conditions as positive.

Franchise dealers rated the current market at 62, down from 67 in the second quarter and 73 in the third quarter of 2021. The score of 45 by franchisees and independents together was down 5 points quarter over quarter and 14 points year on year. .

Franchisees marked the future market – three months later – at 59, compared to 71 a year ago for the fourth quarter of 2021. Including independent dealers, all respondents marked the future market at 44 – the highest number low for this question since Cox began the investigation in the second quarter of 2017.

Smoke called it significant that dealers expected the fourth quarter to be worse than the third. Prior to the coronavirus pandemic, dealers surveyed still expected the coming quarter to outperform the current market, he said, attributing that previous status quo to dealers’ natural optimism and confidence.

“It’s pretty remarkable when we find ourselves in this situation,” Smoke said.

The change in mood from pre-pandemic optimism, according to Smoke, reflected uncertainty among dealers “leaning to the negative”, particularly for factors beyond a dealer’s control such as the economy and inventory issues.