Dealers a Little Down

U.S. auto dealers’ view of market conditions eroded in several areas in the third quarter, but there were some bright spots despite continuing pressures.

Cox Automotive’s Dealer Sentiment Index survey of more than 900 franchised and independent dealers found softening sentiment on current and future market conditions and customer traffic.

The declines were partially balanced by slightly improved profits and operating cost sentiment.

Still, one GMC dealer wrote, “Operating costs, insurance costs, payroll costs, vendor costs, advertising costs. Every single thing is going up.”

One undeniable trend stood out in the survey: fallen customer contact online and in showrooms, Cox reported. The customer traffic score on the index fell from 36 to 34. Scores higher than 50 indicate the majority of dealers having positive views of conditions.

“The clearest deterioration was in new-vehicle sales,” Cox said. “Franchised dealers reported weaker new-vehicle sales compared with both the previous quarter and year-ago levels, while used-vehicle sales changed little.”

The challenge with used-car sales remained sourcing adequate supply to meet robust demand for the less-costly vehicles. One Chevrolet dealer wrote on the survey that there are “not enough affordable vehicles. Not enough under $20,000 that aren’t total junk or need lots of work.”

Dealers listed economic conditions as the top obstacle to improved business, followed by market conditions, interest rates, expenses and political climate. They see the economy as weighing on consumer confidence, spending and vehicle affordability.

One Honda dealer wrote that, “Gas cost, war, inflation, unemployment and increase in the cost of doing business have impacted business.”

In addition to improved profits and costs, dealers cited increased interest in electric vehicles, whose sales had plunged after the end of federal tax credits last fall but whose prospects have risen amid high gas prices.

Cox conducted the survey from late July to early August.