New car sales have accelerated in 2024, but the people selling those cars don’t feel any better. A survey of car dealers finds them down about the current market and worried about their future.
Cox Automotive’s latest Dealer Sentiment Index finds car dealers feeling pessimistic as the second quarter of 2024 wraps up.
About the Survey
Cox Automotive is the parent company of Kelley Blue Book. Its researchers survey dealers quarterly. The results can be helpful for shoppers when gauging when to shop and how to negotiate. If you know the dealer across the table expects to sell every car with ease, you have limited negotiating power. If you know they’re nervous about their future, you may have more room to haggle.
Researchers surveyed 1,026 dealers – 550 from franchised networks and 476 from independent dealerships – about their expectations for the industry.
Researchers convert dealer answers into numerical values. A score of 50 is neutral. Scores above 50 indicate optimism, and scores below 50 show doubts.
Dealers: Nothing Is Getting Better
The average dealer’s answers for the second-quarter survey amounted to a score of 42 — identical to first-quarter results and not far from their early COVID-19 pandemic low of 40.
One year ago, the index was 45, below the 50 threshold. The last time current market sentiment was above 50, suggesting the market was strong, was in Q2 2022.
Last quarter, dealers expected their situation to be better by now. In Q1, they rated expectations for Q2 at 51. Now, they’ve settled into longer-term pessimism. Expectations for the third quarter rated just a 44, showing dealers expect a poor sales summer.
“There is a lot of uncertainty in this market, leaving consumers and dealers alike unsure of the road ahead,” says Cox Automotive Chief Economist Jonathan Smoke. “On top of uncertainty about interest rates, we are heading into an election season, and this one is especially breeding more concern. In the auto business, uncertainty is the enemy – it negatively impacts sales, hurts consumer sentiment, and leaves auto dealers feeling troubled.”
Dealers feel worse about the market than the numbers suggest they should. They rated their current profits at 36 — low but the highest number in nearly three years. The last time dealers rated profits higher was in the third quarter of 2021.
Negotiating Leverage
“Overall, dealer sentiment is likely worse than actual market conditions,” notes Smoke.
With few exceptions (we’re looking at you, Toyota, and Honda), dealers have an oversupply of new cars to sell.
As unsold cars pile up, factories and dealerships turn to discounts to move them off the lot. Incentives have risen through 2024 as the auto industry has an unrelenting backlog.
Dealers believe that the situation won’t change anytime soon. They gave their inventories an average score of 69 – the highest in the survey’s history.
Worries: Interest Rates, Economy, Election Year Politics
Asked what holds back their business, auto dealers in Q2 focused on Interest Rates, the Economy, and Market Conditions. Those are the same top three factors as last quarter and last year.
However, as the U.S. presidential election in November approaches, the political climate continues to increase as a factor impacting business. In the latest survey, 36% of dealers cited the political climate as a factor holding back business, up from 33% in Q1 and 29% one year ago.
Smoke commented, “In many ways, the Political Climate is a surrogate for ‘uncertainty.’ Many dealers and consumers believe the election outcome will impact the economy and the auto market in some way – either good or bad – and that expectation of change is causing paralysis in the market and hurting sentiment.”
