Slow economic growth and high interest rates dampen U.S. Q3 auto dealer sentiment

In the third quarter, Q3, of 2023, the Cox Automotive Dealer Confidence Index (CADSI) revealed that dealer confidence in the U.S. remained largely stable despite high interest rates and economic concerns significantly impacting the car market. 

The Q3 2023 CADSI is based on responses from 983 U.S. auto dealer respondents, including 429 independents and 554 franchised dealers. The survey conducted from July 24 through August 8, 2023, weighs dealer responses and considers the kind of dealership and the number of sales to accurately reflect the national dealer population.

The current market index for Q3 is 45, below the threshold of 50, indicating that more dealers believe the current market is weak rather than robust. However, the current market index has declined since reaching an all-time high of 67 in Q2 2021. 

According to the Q3 data, the dealer sentiment fell below the 50-point level for the fifth consecutive quarter. Furthermore, franchised dealers have a current market index score of 57, up one point from the previous quarter, and are significantly more optimistic about the present market than independent dealers. Moreover, the current market index for independent dealers dropped one point to 41.

In the Q3 CADSI, interest rates, the state of the economy, and market circumstances are significant concerns for dealers. As previously stated, most dealers believe that costs are climbing, and they also concur that profits remain much lower than they were a year ago. The profit index scores are similar to pre-pandemic norms after reaching new highs in the second half of 2021 and remaining strong through early 2022.

Conversely, most dealers still consider used vehicle sales to be deplorable. The used-car sales environment index score rose to 44 in Q3, up from 42 but still below the 47 mark set a year earlier. Even though the independent dealer index score increased by 3 points to 40, independent dealers still consider the used vehicle sales situation very difficult. Franchised dealers had a higher perception of the used car market, scoring 58. Both results fall far short of pre-pandemic levels.