Sentiment among U.S. car dealerships in Q3 of 2022 is in decline, with tight inventory, inflation, and rising interest rates all significant factors in leading to an historically low market outlook.
According to the recent Cox Automotive Dealer Sentiment Index, the current market index is below the threshold of 50, recording the fifth quarter-over-quarter decline in overall market sentiment, falling five points from Q2 and 13 points year-over-year.
“Importantly, a drop in current-market sentiment is not typical in the third quarter,” said Cox Automotive Chief Economist Jonathan Smoke. “The third quarter is usually mostly stable and, for franchised dealers, is often improving. There is typically excitement building with new models rolling out and energy for the new-vehicle market through the fourth quarter and holiday seasons. That is just not the case this year.”
The Cox Automotive Dealer Sentiment Index is based on survey responses collected from U.S. car dealerships, with the latest Q3 2022 study based on responses from 1,040 auto dealers, including 574 franchised dealers and 466 independent dealers. The survey was conducted between July 26th and August 9th, 2022.
Responses were weighted by dealership type and sales volume for a more accurate depiction of the national dealer population, with each survey aspect evaluated as strong / increasing, average / stable, weak / decreasing, or simply “don’t know.” These responses were then used to calculate a mean score.
According to the report, sentiment among car dealerships with regard to new-vehicle inventory improved slightly compared to the previous quarter, and improved significantly year-over-year. However, the improvements were not seen across the board, with domestic brands fairing better than Asian import brands. Used-vehicle inventory is also slightly improved compared to the previous quarter, while profits remain historically strong for franchised dealers. Nevertheless, all index scores associated with vehicle inventory remain below the 50 threshold, which indicates dealers continue to face big challenges with regard to new- and used-vehicle inventory.
Finally, the report goes on to state that car dealerships are also concerned with factors related to the economy, with the economy index dropping to 45 from 50 in Q2. More specifically, the study indicates that dealers are worried about inflation, the possibility of a recession, and falling consumer confidence.
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Comments
I keep hearing that inventory is getting better, but I don’t see it. My local GM franchise only has a handful of new trucks. Most are low trim 1500s with the 4-banger that no one really wants. Couple that with a couple of Equinoxes and Malibus, not a pretty picture. On the other hand, they have plenty of overpriced used inventory that’s now starting to sit.
Same around here. No new inventory to speak of, and if a vehicle does arrive it is already pre-sold or literally gone within a couple of hours. Some local high volume dealers are going so far as to “guarantee” new vehicle delivery within 4 weeks of placing an order and pricing not to exceed MSRP, but even that isn’t a sure thing.
Here’s my experience. I *want* to buy a new car. It has been almost 8 years since I bought my current Chevy new…I don’t really concern myself with what the financing terms are as I most likely won’t need to finance it. I have no problem paying MSRP but refuse to pay more than that. No one has inventory, and if they do it is marked way up (which is why they have it in the first place.) The Chevy dealer I purchased my car from has reached out to me. I emailed them back expressing some interest and they were radio silent/non-responsive. There are other makes and models I am interested in…again no available inventory. I am 6ft 4in tall. I need to sit in and test drive before committing to anything, so the “just place an order” model doesn’t work for me. Meanwhile electrification is gaining steam. Do I buy another ICE vehicle knowing that in the next 7 or so years it will potentially be worthless (I am in one of the states that looks to ban new ICE car sales by 2030.) Do I buy a hybrid or PHEV as a bridge to a pure EV 7-10 years from now? Do I simply wait 2 more years with my current Chevy and go all-in on an EV in 2024? The automakers have created their own mess of consumer confusion, between pricing, availability, and the focus on electrification. People don’t know what to pay, where to find it, and what they should actually be buying for the long term. The longer I wait to buy a new car, literally the less I care about it. I have friends who are in the same boat. They would normally buy a new car every 4-5 years. They are financially able to buy whatever they want, but are now going on 6-7 years since their last new vehicle purchase just because they don’t know what to do and are starting not to care about it anymore. Even my neighbors haven’t purchased new vehicles in several years…they just soldier on with what they have.
If you’re somewhat serious about replacing your current vehicle,, go to the dealership. See what they have. Initiate conversation so they understand what you’re looking for. Maybe they don’t have a new model in stock but they have a used model. Or maybe they’re getting something in soon. Making the effort to show the dealer your serious will go a long way. Sending an email doesn’t suggest you’re very serious. For all they know, you’re a kid playing a prank.
Taking the initiative to visit the dealer is going to go a long way to minimizing your current frustration.
Same here I stopped by my dealer last Saturday, he had 3 Silverados, 2-half tons and 1-three quarter. Said he had 5 in transit but most were 4 bangers nobody wants. I told him I’d be back next year to order the refreshed turbo diesel that I want.
My free red star will probably never ban ICE sales so I don’t have that worry and I am ready to buy a new Silverado but will not pay any premium. I will wait for things to get back to normal and buy a new diesel truck that will last at least ten years. I may eventually get an EV for getting groceries but never for a primary vehicle. ICE vehicles will be around for decades in my opinion, in fact I see a big business opportunity in refurbishing them, especially trucks! Gas prices will drop once the blue states force conversion and demand for gas drops. Diesel will be around even longer for heavy transportation and off road vehicles. I will be re-gearing HD pickups to increase their mileage to be equivalent to half tons. Just say no and drive what you want, it’s America, let’s act like it!
I would wait on the EV till you see that the model you prefer is not full of issues. An EV is not in the near future for me as it would cost as much as a year at Harvard to bring juice to my cabin and I have no faith in public charging since on a bad day I need to drive 5 miles to get a cell signal.
Looming recession? We are currently in a recession!
There is no way this current path will be sustainable moving forward. Between certain vehicles going up as much as $8500 in one model year to quality control dropping to dealer markups this will certainly come to a head before too long. Some are in denial that we are in a recession but technically we are and it’s going to keep getting worse until this bubble bursts.
I agree with the statement above, the industry caused the confusion with too many dealers took advantage in the last two years over pricing and gouging. It placed more distrust with dealers in general Though there are good ones but the few bad ones creates the news as if they all are.
After two years of fueling inflation, the auto industry will now pay the price for being greedy.
We sell everything Chevy Builds and most sales/reservations are way before the vehicles hit the lot. GM needs to find a solution to their never ending Build Shy issues, and the Semi Conductor shortages. The freaking Pandemic is behind us Sales are Brisk in spite of the interest rates. They just need to build and ship more vehicles. The latest shortages and build shy issues are Wheel Liners, and Hood Insulators. Bring that parts manufacturing back to the US and we would not be in the mess.
GM needs new leadership!
Let’s not forget the $1500 added OnStar to all 2023 vehicles. Just more fluff added like dealer applied paint sealants.
Some dealers never thought of a rainy day. Maybe building that 20 million dollar lake house was premature.