Concerns about the economy and rising interest rates have lowered franchised dealers' expectations for the upcoming retail environment despite improved new-vehicle inventory, according to the latest quarterly index survey from Cox Automotive.
Results from the fourth-quarter Cox Automotive Dealer Sentiment Index show franchised dealers polled have record-low expectations for their area's vehicle market in three months. The score of 48 is down 21 points from a year ago and 11 points from third-quarter 2022 results. It is the first score below 50 since Cox began the survey in the second quarter of 2017.
Independent dealerships' expectations for the future also reached a new low, with a score of 39. The industry aggregate score is a record-low 41.
Scores greater than 50 indicate dealers view conditions as positive or improving.
Cox surveyed 604 franchised dealers and 430 independent dealers from Oct. 25 to Nov. 7 to calculate the latest quarterly index. In addition to asking dealers their outlook on the three months ahead, Cox asked about the past 90 days and identified factors affecting dealers' optimism or pessimism. Cox weighed responses by dealership type and sales volume to calculate a diffusion index.
"High loan rates and a generally slowing economy are clearly weighing heavily on U.S. auto dealers right now," Cox Automotive Chief Economist Jonathan Smoke said in a statement. "Dealers are normally optimistic, so the drop in the 3-month outlook to a new low in our survey history is particularly noteworthy. As the year began, dealers were telling us about one obvious problem: inventory. Now, as 2022 comes to a close, it's all about the economy and interest rates."