Car dealer sentiment falls in the third quarter due to concerns about the economy

Car dealer sentiment falls in the third quarter due to concerns about the economy

Economic concerns obscured franchise dealers’ view of the market in the third quarter and their expectations for the future, Cox Automotive’s top economist said Wednesday.

Franchise dealers polled this summer for Cox’s Dealer Sentiment Index for the third quarter rated their markets as still favorable, but worse than 90 days earlier or at the same time in 2021. And dealer respondents expected a further decline in conditions during the latest few months of the year.

“The economy is the source of concern and I think…why the outlook is gloomier,” Cox Automotive Chief Economist Jonathan Smoke told me. Automotive News on Wednesday. “Across the board, costs are rising, the new vehicle market remains tight and sales are holding up remarkably so far. It’s more about the uncertainty about the future and the economy that I think is driving the lower outlook.”

Smoke noted that while the scarce vehicle inventory situation was improving, there was still a long way to go and a challenge that remains.

The deterioration in franchise dealer ratings for the market in the third quarter went against a common seasonal trend, Smoke said. Excitement over the new model year tends to find franchisees taking a more favorable view of third-quarter terms, but that wasn’t the case this year, he said.

The industry as a whole, franchise dealers and the self-employed, scored the market negative in the third quarter at 45 out of 100 on the Cox index, which Smoke described as “an ominous signal.”

Between July 26 and August 9, Cox surveyed 574 franchise dealers and 466 independents to calculate the latest quarterly index. The company not only asks dealers about their outlook for the next three months, but also asks about the past 90 days and identifies factors that influence dealers’ optimism or pessimism. Cox weighs responses by dealer type and sales volume to calculate a diffusion index. An index greater than 50 indicates that dealers view the terms as positive.

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