Auto Dealers Experience Surge in Optimism After Election: Cox
The latest update from the Q4 2024 Cox Automotive Dealer Sentiment Index (CADSI) sheds light on a positive shift in optimism among U.S. auto dealers. Following the recent national election, dealers are feeling more hopeful about the road ahead, despite current market conditions still being considered weak.
Jonathan Smoke, chief economist at Cox Automotive, attributes this renewed hope to the resolution of political uncertainty post-election. With the potential for tax rebates and lower interest rates on the horizon, dealers are looking ahead to 2025 with a brighter outlook.
The market outlook index, reflecting dealers’ expectations for the auto retail market in the next quarter, saw a significant jump from 42 in Q3 to 54 in Q4. This suggests that more dealers anticipate a stronger auto market in the coming months, marking the highest fourth-quarter outlook since 2021.
Although the current market index score remains at 42, indicating that most dealers still view the present retail auto market as weak, the increase in optimism is evident. Franchised dealers, who sell both new and used vehicles, are more optimistic than independent used-only dealers, with a score of 50 indicating an equal split between viewing the current market as strong or weak.
While profitability has seen a slight increase in Q4 compared to Q3, with both franchised and independent dealers noting better profits, it still falls below levels seen in previous years. The cost index has also improved, indicating some easing of pressures for dealers.
Despite a mostly flat view of the U.S. economy in Q4, dealers remain cautious due to high inflation and auto loan rates. The new-vehicle sales environment improved slightly, as did the used-vehicle sales environment, though customer traffic is still viewed as weak.
As inventory levels improve, dealer opinions on automaker-backed incentives remain relatively stable. While the sentiment towards electric vehicle (EV) sales declined slightly in Q4, dealers continue to see national tax credits positively influencing EV sales.
The top factors holding back business, according to dealers surveyed, include the Economy, Interest Rates, and Market Conditions. Political Climate and Expenses also play significant roles in affecting dealers’ businesses post-election. However, there has been a decrease in the number of dealers citing the Political Climate as a major concern following the recent election.
Overall, with the political landscape becoming clearer and potential support measures on the horizon, auto dealers are looking towards a more promising future in the coming months.
