U.S. auto dealers’ view of their prospects got a typical seasonal boost in the first quarter as they looked to the spring shopping season. But they were still lukewarm, and that was before the U.S. and Israel started bombing Iran.

Cox Automotive surveyed more than 1,000 franchised and independent dealers in late January and early February. 

“Dealers are looking for relief from interest rates, a good spring selling season and a pickup in consumer confidence to help turn that optimism into sustained momentum,” said Cox Deputy Chief Economist Mark Strand.

Cox’s sentiment index measuring current market views rose from 38 to 41, still well below the 50 threshold indicating average or stable. Franchised dealers alone had an index reading of 48.

When considering the next three months, sentiment improved sharply to positive territory from 42 to 56 as dealers anticipated consumers appearing at their dealerships eager to use tax returns toward new rides. That level still indicates caution in a normally optimistic group of businesspeople, Cox said.

The muted sentiment improvements came as customer traffic fell to its lowest since the Covid pandemic while profits waned, phenomena Cox attributed to increased costs and consumer affordability concerns. 

The index for customer traffic fell from 31 to 28, the lowest since the same reading in the first quarter of 2021. The profit index declined from 36 to 32, “well below historical norms,” Cox said.

Dealers’ responses reflected the reality of high vehicle prices, their sentiment for new-vehicle sales inching down one point to 48. It was the second straight quarter that index clocked in below 50, a first since Cox started the survey in 2017. A three-point slowdown in new-vehicle supply growth to 56 didn’t help.

Meanwhile, dealers’ used-vehicle sales outlook inched up two points to 44, even as used inventory remained limited at an index reading of 45. 

Not surprisingly, electric-vehicle sales sentiment kept falling, hitting a record low for the index of 33 and particularly dim among franchised dealers. Overall outlook for the segment reached an even lower 28, a level precipitated by the Oct. 1 expiration of the federal EV tax credit.

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