Car dealers in the U.S. are still worried about the future. They’re no longer concerned about a lack of cars to sell. But high interest rates and economic uncertainty have them worried would-be buyers can’t afford their products.
That’s the conclusion from the latest Cox Automotive Dealer Sentiment Index. In a survey of 1,060 U.S. auto dealers conducted quarterly by Kelley Blue Book parent company Cox Automotive, the index tells car shoppers how the dealer on the other side of the negotiating table feels about the future.
The second quarter of 2023 marks the fourth consecutive quarter when the average dealer has had a more pessimistic than optimistic outlook on future business. Scores improved slightly to 45 on a 100-point scale but remained below the 50% mark.
Plus: Ever-higher interest rates are squeezing subprime buyers out of the car market
Dealers rate economy as weak
Auto dealers in the U.S. continue to view the U.S. economy as weak. One year ago, the current U.S. economy index score was 50, indicating dealers were mostly neutral in their views. Now, a majority of dealers view the economy as weak. The index score in Q2 is just 44.
The profit index slid to 41 — a seventh straight quarterly decline. Dealers indicated that customer traffic, both in-person and online, was higher in the second quarter.
Also see: Fed might hike interest rates again in June instead of a ‘skip,’ some economists think
More confident about new car sales than used
Dealers feel better about the new vehicle market than about used vehicle sales. They rated the new vehicle sales environment at 58 but the used vehicle market at 42.
When asked about factors holding back business, “the economy” (55%) and “interest rates” (53%) were the top two worries cited.
Thirty percent of dealers indicated “credit availability” is a challenge in the Q2 survey, up from 26% in Q1 and only 17% in Q2 2022. “Political climate” also significantly increased, although it ranks seventh on the list of top factors, behind “expenses” which was sixth.
Also see: U.S. jobless claims leap to nearly two-year high of 261,000
Dealer sentiment about electric vehicle sales is mixed, with dealers rating the EV market at 54, equal to the score from one year ago and down for a second consecutive quarter after peaking at 61 in Q4 2022.
This story originally ran on KBB.com.
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