Dealer sentiment acknowledges both slow downs and bright spots in Q4

Earlier this week, Cox Automotive released their Dealer Sentiment Index report and survey results for Q4. The study showcased responses from 1,077 auto dealers, which were comprised of 584 franchised dealers and 493 independent dealers. 

Cox Automotive took this survey of dealers from November 4th to November 15th, a time where the COVID-19 pandemic began to surge again, and the election results were in full swing. 

There were a variety of key takeaways from this sample of dealers around the country. And while the third quarter seemed to show some bright spots, sentiment has seemed to change—and in some cases not for the better— going into the latter part of this year. 

So, what are dealer’s collective feelings about the last quarter of the year? How does it compare to what you are experiencing? Take a look at these takeaways from Cox’s most recent survey and report.  

Customer Traffic Has Naturally Taken a Hit

The past month’s COVID-19 surge has impacted dealership sales numbers. Both franchised and independent dealers reported that customer traffic had fallen within the last three months. This timeline coincides with the expiration of unemployment insurance and other CARES Act provisions. Many consumers were likely missing much of their disposable income due to the end of these programs and possible job losses. Additionally, physical traffic could also have been reduced due to more people being open to buying cars online. According to this survey, if you experienced this in the last few months, you weren’t alone.  

A Tale of Two Experiences

While it makes sense that franchised and independent dealers would have different experiences, since the former is attached to OEMs, it’s still striking to see the differences. This survey revealed that franchised dealers are fairing a bit better than independent ones. Franchised dealers reported more robust profits, an easier ability to obtain credit, and less pressure to lower their prices. Additionally, costs to run their business seems to be growing for independent dealers when compared to their franchised counterparts. 

Both groups also experienced different factors that were holding them back. For franchised dealers, the political climate was listed as the top reason, whereas independent dealers felt business impacts from COVID-19 were the primary obstacle.   

New Vehicle Sales Look Good, But Used Vehicle Inventory Wins Out

Even though traffic may be slow, the climate for new vehicle sales looks good for both independent and franchised dealers. Even amid a rocky economy, demand for new vehicles still seems to be rising among consumers. However, that’s where the good news regarding new cars ends. 

The issue is that there is a low inventory mix. It’s been challenging for dealers to get their hands on new inventory for much of the year. This has been due to OEMs having to shut down production at factories due to the pandemic. This development has meant that dealers could charge higher prices, but some may not have been able to capitalize on demand due to the lingering problem of low inventory mixes. Nevertheless, both groups feel more positive about used vehicle inventory, which has also seen an uptick in demand.  

Even Feelings About the Economy

Both groups tended to trend in the middle regarding the economy. Again, independent dealers felt a bit less confident about the U.S. economy than franchised dealers. However, both seem to not feel overly optimistic or pessimistic about it. During this time, a lot was up in the air regarding the presidential administration that would take over the country and the policies this individual would put into place regarding COVID-19 and the economy. Now that the dust has settled, some dealers may feel differently about this component of the study.   

Things Are Still Up in the Air For 2021

Even amid a vaccine rollout and a decided winner in the election, a lot is still up in the air for 2021. There are worries that 2021’s performance will not be enough to make up for this year. However, some analysts see promising signs for car sales next year. 

Both groups felt the U.S. economy was somewhere in the middle, which, while not great, does express a bit of hopefulness about where things are and where they could be going. If inventory levels can return to normal and the vaccine prevents another shutdown, then dealer sentiment may be at even higher levels in spring 2021. 

Visit this link to read the entire Cox Automotive Dealer Sentiment Q4 survey. 

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