With a difficult election season finally in the rearview mirror, America’s car dealers are feeling more optimistic about the future of their business. They still view current market conditions as bad for them but think a turnaround is ahead, according to a new survey.
Why You Should Care
Kelley Blue Book’s parent company, Cox Automotive, surveys dealers quarterly about their perspective on their industry. 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.
Related: Is Now The Time To Buy, Sell, Or Trade-In A Car?
For its fourth quarter survey, Cox Automotive interviewed 933 dealers — 493 from franchised networks and 440 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.
Rising From A Very Low Score
Last quarter, the market outlook index (which measures expectations for the coming quarter) sat at just 42. This quarter, it jumped to 54. That marks “the largest surge we have had quarterly in the history of the data,” said Cox Automotive Chief Economist Jonathan Smoke.
Dealers are still down on the current market, giving today’s conditions a score of just 42. So, they feel better about the prospect of selling more cars soon, but not yet. That’s valuable information this month, as discounts continue to rise and year-end sales might represent your best chance to get a good deal.
Related: When Will New Car Prices Drop?
Fewer Worried About Politics
Last quarter, 44% of dealers thought the tense pre-election political climate was hurting their business. With the election settled, just 35% now think it’s a factor.
Dealers now rate the overall economy, high interest rates, and market conditions as more important to their business expectations.
Still Struggling to Profit
In Q4, the important profit index increased slightly from 34 to 35. Both franchised and independent dealers noted higher profitability compared to Q3, but the index score remains well below levels seen in 2021 and 2022.
Dealers scored easy profits late in the COVID-19 pandemic when supply chain problems left new cars in short supply. They’ve had a harder time since, as supplies have recovered, and they’ve had to discount cars to attract buyers.
Views of the U.S. economy were mostly flat in Q4 at 41, equal to the score in Q3 and two points higher than a year ago. Dealers still see the economy as weak, a sentiment that has been consistent for the past two years due to elevated inflation and high auto loan rates.
Dealers Still Think Incentives Are Low; Prices Could Come Down
Discounts made up 10% of the average new car sale price last month. But most car dealers have seen them far higher — they routinely made up more than 10% before the pandemic.
So they rated incentives at 37 — unchanged from last quarter and the highest level in three years.
Price pressure fell slightly in Q4, from 66 to 63, but a majority of dealers continue to feel more pressure to lower prices.
