Buying a new car involves negotiation. A good negotiator sits down to talk, understanding the outlook of the person on the other side of the table.
If you’re negotiating the price of a new car this month, know this — the dealer is worried.
Kelley Blue Book parent company Cox Automotive surveys auto dealers once a quarter for its Dealer Sentiment Index. Third-quarter results are out this week, showing a troubled industry.
Dealer sentiment fell below the 50 threshold for the fifth consecutive quarter, meaning more dealers see the current auto market as weak than strong. Franchised dealers scored 57, up one point from last quarter. But independent dealers scored 41, pulling the overall score down to 45.
Looking toward the next quarter, dealers are growing more pessimistic. The 3-month market outlook fell from 47 to 45.
Interest Rates, Economic Slowdown Driving Anxiety
What has them worried?
“Persistently high interest rates and lingering concerns about the economy and market conditions are dampening overall dealer sentiment,” says Cox Automotive Chief Economist Jonathan Smoke. It’s harder to sell cars when buyers know high interest rates will drive them into high monthly payments. And though the credit market has finally improved for consumers in recent months, it has improved only marginally from historically difficult numbers.
Sixty-one percent of dealers cited interest rates as their biggest concern. Fifty-four percent cited economic growth as a whole.
Most dealers see their costs as growing and say profits, already lower than a year ago, continue to decline.
Dealers More Pessimistic on Used Cars
Dealers feel slightly better about their ability to sell each new car. The new vehicle sales environment in Q3 increased one point to 59. But the opposite is true of used cars. In Q3, the used vehicle sales environment index score increased to 44, up from 42 but still below the 47 recorded a year ago.
Dealers know that the used car supply will likely remain low for years. Automakers built fewer cars during the COVID-19 pandemic. That means fewer cars will make their way to the used car market for years to come.
Many Still Not Convinced on EVs
The transition to electric vehicles (EVs) worries them, too. The index scores for EV sales expectations for both franchised and independent dealers were at their lowest points since Q2 2021, when Cox Automotive first began measuring it.
That reflects a persistent divide between those who sell cars and those who buy them. In a separate Cox Automotive study this summer, 53% of consumers agreed that EVs will eventually replace traditional gas-powered vehicles. Dealers were more cautious, with only 31% agreeing on an all-EV future.
Browse dealer reviews, or share about your experience at a dealership here.
