Optimistic Spring Boosts Sentiment of U.S. Automobile Dealers, Despite Profit Challenges and Rising Costs
The recent Q1 2025 Cox Automotive Dealer Sentiment Index (CADSI) revealed a positive shift in the U.S. automobile dealers’ perspective on current market conditions compared to the previous quarter. The index rose from 42 in Q4 2024 to 44 in Q1 2025, indicating an improvement in dealer sentiment.
Although the current market index score increased year over year, the score of 44 still signifies that more dealers perceive the market as weak rather than strong. Franchised automobile dealers exhibited a more optimistic outlook with a score of 54, viewing the market as strong. On the other hand, independent dealers rated the current market as weak with a score of 42, although this was higher than the previous quarter and the previous year.
According to Jonathan Smoke, Chief Economist at Cox Automotive, the first quarter demonstrated an improvement compared to the previous year, even amidst uncertainties regarding future growth. The market outlook index in Q1 increased to 58, its highest score since 2022, reflecting dealer optimism for the upcoming spring selling season. The positive factors contributing to dealers’ sentiment include healthy inventory levels and consumer urgency to make purchases. However, potential shifts in tariff stances by the administration present uncertainties for the future momentum.
The profit index showed a decline from 35 in Q4 to 34 in Q1, indicating weak profitability perceptions among dealers. While franchised dealers saw a drop from 45 in Q4 to 41 in Q1, matching the low score from the previous year, independent dealers’ profit index remained unchanged but remained near an all-time low due to perceived weak profitability. On a positive note, the cost index in Q1 remained steady at 71, lower than the previous year, although dealers still acknowledged that business expenses were increasing.
Franchised automobile dealers reported a favorable sales environment in the Q1 survey, with the new-vehicle sales index staying at 54, higher than the previous year. However, the new-vehicle inventory index fell to 63 from the last quarter’s 73, indicating slower growth rates in inventory compared to the previous year.
The used-vehicle sales index saw an improvement to 45 in Q1, up from the previous quarter and higher than the previous year, marking the fifth consecutive quarter of improvement. Franchised dealers viewed the market more positively compared to independent dealers, with an index of 58 in Q1. Independent dealers had a score of 41, indicating a tougher sales environment. The used-vehicle inventory index rose for the second consecutive quarter, with franchised dealers perceiving an increase in used inventory compared to independent dealers facing inventory challenges.
Electric vehicle (EV) sales and market expectations varied among dealers, with mixed views on sales performance. The expectations for the EV market in the next three months showed a decline, with most dealers anticipating a decrease rather than growth. However, dealers recognized the benefits of the electric vehicle tax credit for dealerships and sales, showing favorable views towards the credit.
