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.