Vehicle dealers are feeling a little bit better in the start to 2019. This is according to the first quarter Cox Automotive Dealer Sentiment Index. Dealer sentiment reached record lows in the last quarter of 2018, as lagging sales, tariffs, weather and rising interest rates loomed large. The good news is that sentiment has improved in the first quarter of this year. The bad news is it’s still pretty dismal: the current market index rose to 48, up from 44 in the fourth quarter.
“Dealer sentiment” is obtained from a quarterly survey that Cox Automotive issues to a representative sample of franchise and independent auto dealers measuring dealer perceptions of current retail auto sales and sales expectations for the next three months as “strong,” “average” or “weak”. In addition, the survey asks dealers to rate new-car sales and used-car sales separately along with key drivers such as consumer traffic. Their responses are used to calculate an index in which numbers over 50 indicate strong dealer sentiment.
“We’ve seen a turnaround in dealer sentiment and the outlook for the future this quarter compared to the fourth quarter,” said Cox Automotive Chief Economist Jonathan Smoke in a statement. “However, gone is the euphoria we saw this time last year as views of new- and used-vehicle sales are lower.”
There has been plenty already this year to depress dealer sentiment: remembrances of the longest government shutdown in history, record cold temperatures from the “polar vortex” in January, and no resolution of the tariff situation.
Market conditions, consumer confidence and interest rates are the key measurable differences relative to this time last year when peak optimism was based largely on expectations of strong demand fueled by tax reform, according to Cox. Additionally, differences in sentiment between franchises and independent dealers narrowed in the most recent quarter.
“There is no question that it’s going to be an interesting year,” said Smoke. “As dealers look ahead, they have a less-than-positive view of growth in the future. We see the threat of tariffs potentially creating a pull-ahead affect in the near term, and then if tariffs are implemented, sales are expected to drop off dramatically. So, again this year, we are going to deal with an interesting roller coaster ride.”
