Anyone who walks into a car showroom expects to see certain things. There’s the water cooler, the coffee machine, and the smiling salesforce. That’s the surface and the hype. However, new car auto dealers aren’t smiling inside, according to research by Gildshire and website 24/7 Wall Street. As it turns out, U.S. new car auto dealers aren’t optimistic about demand for new cars next year, and the following year doesn’t look great either.
These conclusions come from the latest edition of the Cox Automotive Dealer Sentiment survey. Cox surveys new car auto dealers’ moods and compares them to previous year survey studies.
Here is how the survey works. An index scores a range of 0-100. Any number 50+ indicates that dealers view conditions positively rather than negatively. When the index drops below 50, the overall sentiment is negative.
The overall last-quarter of 2017 sentiment index checked in at forty-four, down from fifty-one July-September and down from forty-six in the final 2017 quarter.
When asked their expectations locally in the next 3-6 months, the index was forty-nine, down from fifty-seven in July-September, and from fifty-three late last year. It’s the first time this index score has dipped below fifty.
Factors Troubling the New Car Auto Dealers:
New car auto dealers hear from consumers that dealers should eat higher interest rates and tariff costs brought about by the actions of the President. If the new car auto dealers absorb those costs, profit margins will be razor thin.
Used car dealers also show a lower index number this year. Pre-owned confidence is down from 53 last year to 48 in the latest survey. Inventory and (you guessed it) interest rates worry dealers the most.
The Cox Automotive Dealer Sentiment survey dug a bit deeper. It asked new car auto dealers the factors holding back their businesses. Market conditions, credit availability, limited inventory, and tariffs were the four factors mentioned most frequently.
Obviously, volatility on the political landscape is an issue across the breadth of the economy. Will the new car auto dealers be positively surprised by 2018 numbers? They hope so because their behind-the-scenes smiles depend on it.