American car dealers are feeling pessimistic about car sales overall as high interest rates and economic troubles continue to apply the brakes to consumer demand, the Cox Automotive Dealer Sentiment Index, or CADSI, shows.
The survey by Cox Automotive shows which factors dealerships think are the chief obstacles to more car sales, as well as dealer outlook on various sub-sectors of auto sales, such as EV purchases.
Surveying the opinions of 554 franchised and 429 independent dealerships for a total of 983 dealer respondents across the U.S., the study shows 61 percent of dealers believe high interest rates represent the main factor inhibiting car sales in Q3 2023. A year ago, only 35 percent of dealers named high interest as the biggest problem.
After high interest rates, dealers believe the economy, market conditions, limited inventory, and customer credit availability are the current limiting factors on car sales, in that order. Credit availability, though ranked lower than high interest rates, is viewed as an important factor by almost twice as many dealerships in 2023, with 33 percent of dealers now viewing it as significant versus 18 percent in Q3 2022.
A year ago, dealers identified limited inventory as the strongest brake on car sales, with 56 percent naming it as a major cause. The economy was a close second at 53 percent, while this year’s primary concern – high interest – ranked fourth at 35 percent.
Dealers expect car sales to remain weak in the coming months, with current Q3 dealer sentiment at 45 and the outlook for the next three months down two points to 45 as well. A rating of 50 indicates dealers are neutral about car sales, with over-50 ratings showing optimism and under-50 ratings indicating pessimism.
Zooming in on the results, franchised dealers are optimistic, with sentiment well above 50, though declining. Independent dealers are pessimistic, with scores closer to 40. “Independents are less hopeful due to affordability issues that more acutely affect the used-vehicle market and their businesses,” according to Jonathan Smoke, a leading Cox economist.
While franchised and independent dealers may differ on their opinions of several key areas of car sales, both types of dealerships are slowly losing confidence in EV sales. Sales in this sector are falling and dealers believe the three-month EV outlook is slightly gloomy, with an overall confidence score of 47, slightly below the neutral 50.
Jonathan Smoke nevertheless struck a hopeful note in his analysis, remarking “the pressure dealers feel is from over-supply rather than a lack of demand.” He added that high EV prices are “a barrier even to considering an electric vehicle,” though he expects the pressure of inventory backlog to drive down prices sooner or later.
The latest CADSI results jibe with the Q2 2023 dealer sentiment index GM Authority previously reported on, with sentiment unchanged from the quarter-ago score of 45.
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Comments
Perhaps its the extra 20% “markup” that these scumbag dealerships are throwing on the hoods of each of their vehicles that are “holding back” sales… Stopped at a dealership on Saturday to check out a Chevy Trax, required $4K above sticker on a $21K MSRP Trax LS. I tried to make small talk with the salesman by asking about the 3-cyliner engine, and his response was “actually it has a 1.5L turbo 4 cylinder”. He tried to make me feel better about the $4K fee by reminding me the UAW may strike and “it could go up to $6K because the dealer still has to make money”… At least in my particular case, that’s why sales are (rightfully) down…
California dealers are discounting Trax’ $4K and around here, it’s easy to find discounts of $1500-2000. All of the TV ads might change that however.
Wow…just wondering what state you live in….that’s just plain crazy that they charge that much over MSRP and then they lied to you over the engine size. I’d have told them to stick it and probably got the local news media involved.
The Trax is the lowest days supply vehicle in Chevrolet’s lineup. And once produced overseas, can still take months for a dealer to receive. Want a deal? Look at something that’s not a brand new ‘exciting’ model – maybe an Equinox – those things are discounted by thousands where I live.
Ridiculous dealer markups and lack of inventory are what have been holding me back personally. Now with a UAW strike looming for the Big 3, I am even more hesitant to buy something from them (have been looking at Buick, Ford/Lincoln, and Jeep). Have also looked at Lexus and Acura, and only the Acura dealers seem to have decent inventory.
My friend is also in the market for a car, and has been lamenting the lack of inventory at dealers. They also have not been pleased with dealer pricing and dealers low-balling trade-in values. They were at the Lexus dealer last weekend looking at crossovers, and the dealer told them they didn’t have *any* inventory that wasn’t already sold. My friend was allowed to look at pre-sold units in the detail bay, but nothing was available for test driving.
I couldn’t care less what the interest rate is as it has been almost 9 years since I last purchased a car, and don’t plan to finance all that much, if any, when I buy my next one.
No one, I repeat, no one, should be buying a new vehicle right now with expected large discounts by year end a high possibility.
Agree, just save your money and wait, the deals will return within a year.
maybe its hiking msrp 40%+ in past 2/3 years thats more of an impact than apr? how about that GM? who knows.
let the dealers suffer. and then maybe they wont refuse to order a base trim rather than something that’s 30k above that…. going to get a lot slower. whoever bought something bought. market is tapped out, i keep saying it. even my extremely fancy area is all out of new temp tags. none. that means nobody is buying… probably one of the better ways to gauge your local sales if you drive a lot.
I had to go out of my area back in 12/20 to order a ’21 GMC Sierra reg. cab long bed with just a limited number of options as local dealers just blew me off. They wanted to sell a $50K truck, not a $29K truck.
Do you have a clue how dealer ordering from manufacturers works? Dealers, in a perfect world, want a good mix of trim levels, colors and options. For instance, right now. I’d love to have some base models, but the factory essentially tells you what you can and cannot order. For instance, a base model Traverse would be great to have, but for the last month, all we could order was Premier or High Country.
The outrageous MSRP’s and dealer markups are keeping me away…not the interest rates. They can’t use a lack of inventory for an excuse either on most GM/Ford models except on a few hot sellers. The dealers are their own worst enemy.
If your in the market and dealers get desperate and you know of a dealer that was screwing people avoid them and hopefully they will go bankrupt.
LOL, it’s more like high prices and lack of inventory around here. Most of the available Silverados are 4 bangers and very high end trucks. The mid-priced v-8’s are sold when they come off the trucks. I will wait for the deals when people run out of money later this year or next, then buy what I want with a rebate.
There are essential parts that are no longer available for my XTS. Could this be deliberate to try and force me into a new car?
But of course high interest rates ( and “stealer” rip-offs ) are slowing car sales…..used as well as new. Same thing is going on, at a reduced level, in the Real Estate market thanks to the Fed trying, again, to curtail inflation like they tried to do in the late 70’s/early 80’s and wound up only adding to the runaway inflation. Don’t swallow the Government hogwash that inflation is “only” 8 or 9 % when it’s more realistically hovering between 18 and 19% +
As I recall at the time, fed chair Volker had to come in after Burns’ failure and lean hard on interest rates in order to kill inflation. I bought my first house in ’84, with an interest rate of 13%, though the price of the home was reasonable, and the monthly payment was affordable. Today, neither is true. I agree that perhaps the way the government measures inflation may not coincide with one’s own experience. I remember when prices of most everything shot up immediately after Trump enacted the tarrifs, yet no mention made of inflation.