- Spring sales pushed dealer sentiment higher for the second straight quarter, but future confidence fell sharply.
- The franchised and independent dealer divide widened across nearly every metric in Q2.
- The economy, political climate and inflation are the top concerns weighing on dealers heading into Q3.
Robust spring sales gave car dealers a boost, but many don’t expect that trend to last, according to the Q2 2026 Cox Automotive Dealer Sentiment Index released Monday.
The Index showed current market sentiment improving for the second consecutive quarter. But the forward-looking index dropped to 47 from 56 in Q1, meaning it fell below the 50 threshold that separates a positive from a negative sentiment. Dealers reported inflation, rising fuel costs and political uncertainty as the primary reasons for their concerns.
“Sales in March and April were healthy, and a sharp turnaround from earlier in the year. That likely helped boost current sentiment, but the troubles in the Middle East and rising inflation clearly have the dealers worried about the months ahead,” said Mark Strand, Deputy Chief Economist at Cox Automotive.
Sentiment varies from franchised to independent dealers
Most dealers still view current conditions as weak, even as sentiment ticks up. The current market index rose to 43 from 41 in Q1, still short of the 50 mark that signals strength.
Franchised dealers found conditions more favorable at 53, while independent dealers reported an index of 40. The gap between the two groups widened across nearly every category.
Franchised dealers benefited from strong new-vehicle sales in March and April, which generated healthy trade-in activity and kept used-vehicle inventory stable. Franchised dealers also reported used-vehicle sentiment of 62, the highest since 2022.
New-vehicle sales and profit sentiment
New-vehicle sales sentiment improved to 53 from 48 in Q1, with a majority of dealers viewing new-vehicle sales as good. The gains were driven largely by strong March and April activity. Even so, that’s well below the Q2 2025 reading of 62, when pre-tariff buying inflated demand. Used-vehicle sentiment was flat at 44, below year-ago levels and still short of positive territory.
Profits edged higher in Q2 for the first time in a year, but costs are rising faster. The profit index climbed to 36 from 32 in Q1, still well below the threshold considered strong. The cost index told a harder story, rising to 74, its highest reading in more than a year. Franchised dealers came closest to breaking even on profitability, reporting a reading of 48, though that was still down four points from Q2 2025.
New-vehicle inventory for franchised dealers held essentially flat in Q2, with the index edging up one point to 57. Compared to a year ago, inventory levels are growing. Used-vehicle inventory remained particularly tight for independent dealers, as elevated wholesale prices throughout the spring made it more difficult to stock lots. Price pressure remained elevated but largely unchanged, with the index at 63. New-vehicle incentives improved modestly, with the index rising to 41, its highest level since early 2021.
EV sentiment
The Cox Automotive survey found that EV sentiment is rising, slowly. The EV sales index climbed to 40 from a record low of 33 in Q1. Expectations for future EV sales also improved, rising to 37 from 28.
Independent dealers are leading that recovery, reporting a sentiment reading of 45 compared to just 30 among franchised dealers.
Franchised dealers felt the impact of the expiration of federal EV tax credits the most. Independent dealers, meanwhile, found more opportunities in the growing supply of used EVs amid rising gas prices and an influx of EVs coming off lease.
Top concerns shifting
Dealers point to the overall economy as their top concern. More than half, 55%, said the economy was the number one factor holding back business in Q2, up from 52% in Q1.
Market conditions ranked second at 40%, followed by political climate at 36%, expenses at 33% and interest rates at 32%.
Political climate concerns rose sharply from fifth place a year ago to third overall, and second among franchised dealers, where 43% cited it as a concern.
The Q2 2026 Cox Automotive Dealer Sentiment Index is based on responses from 958 dealers surveyed between April 21 and May 4, including 502 franchised and 456 independent dealers. Responses are weighted by dealership type and sales volume. Index scores of 50 indicate stable conditions, with readings above 50 signaling strength and below 50 signaling weakness.
