Dealer sentiment is improving, but dealers aren’t feeling great about what’s ahead. The Q2 2026 Cox Automotive Dealer Sentiment Index shows confidence rising for the second straight quarter. But expectations for the months ahead dropped sharply. Rising costs, tight inventory, and political uncertainty are all weighing on the market.
On this episode of Inside Automotive, Erin Keating, Executive Analyst at Cox Automotive, breaks down what the data really means for dealers and what they should be watching in the months ahead.
The biggest concern for dealers now
The economy is the dominant concern for dealers right now. Political climate moved up the list for franchise dealers, surpassing interest rates as a top worry. But when Keating looked at the open-ended responses in the report, one theme kept surfacing above everything else.
“When you looked through all of the verbatims, the words that came up the most [were] fuel and energy costs,” said Keating. Fuel and energy costs are shaping how dealers view their own cost structure and how they think about what consumers can afford.
Franchise vs. independent: A K-shaped divide
The Q2 index highlights a split in confidence between franchise dealers and independents.
The index runs on a scale of 1 to 100; scores above 50 signal strength, while scores below 50 signal weakness. Franchised dealers scored 53, while independent dealers scored 40. The divide widened across nearly every category in the quarter.
Keating says the reason behind the split points to a K-shaped post-pandemic economy. That’s when higher-income households recover and grow while lower-income households fall further behind. Independent dealers are finding themselves on the wrong side of that split.
She confirms, “The independents obviously tend to deal with more price-sensitive customers. So they’re probably getting battered every day with their customers being really worried about the economy.”
Additionally, used-vehicle inventory is also driving that divide. Keating says franchise dealers have made aggressive in-store acquisition a priority since COVID, keeping trade-ins that would typically go to auction and independent dealers.
Fixed ops as the profit lifeline
The Cox Automotive Dealer Sentiment Index shows that rising expenses, tighter margins, and affordability pressure are squeezing dealers from multiple directions. Keating says there is little room left to cut costs. That makes growing revenue through fixed operations more important than ever.
Keating notes that dealers who reported improving fixed operations in the Q2 index credited strong personnel and new management for driving those gains. She believes that the service department has been bleeding business to independent shops for years, and winning it back is now a strategic priority.
“Fixed operations is also the name of the game this year. They have been losing it to independent shops for quite some time. And that’s the place to really grow the profit engine,” said Keating.
EV sentiment stabilizes, led by independents
EV sentiment showed signs of stabilization in Q2 after hitting a record low in Q1. Rising gas prices are pushing more consumers to at least consider EVs and hybrids, but the more interesting story in the data is who is driving that optimism.
Independent dealers are more bullish on EVs than franchise dealers, which might seem counterintuitive given the OEM support and infrastructure that franchise dealers have. Keating says the reason comes down to used EVs. “The used dealer lots are really doing well being able to bring used EVs into the market,” said Keating.
Used EVs are widely available, price competitive, and moving well on independent lots. Franchise dealers, meanwhile, felt the impact of expiring federal EV tax credits more acutely. Hybrids are selling strongly across the board, a sign that fuel efficiency has become a top consumer priority.
Political uncertainty is now a business concern
Political climate jumped to third overall among dealer concerns in Q2, surpassing interest rates. Among franchise dealers specifically, it ranked second. Keating says the shift is meaningful, particularly given where much of the dealer community stood not long ago.
“A lot of the dealers were really in support of this administration. So to see more and more of them actually saying, you know what, this is actually starting to get a little bit scary or a little bit tough. I think that speaks volumes to how valid that really feels to business owners,” said Keating.
"These are really successful businesses that are incredibly resilient, but this is testing resilience," said Keating.
Keating says it is not any single policy decision driving the anxiety. It is the volume and pace of change that is making strategic planning difficult. New USMCA requirements, fresh 301 tariffs, and ongoing geopolitical volatility are all adding to the uncertainty.
The road ahead
Dealer confidence may be trending in the right direction, but Keating says the road ahead is still uncertain. Fixed operations, used-vehicle acquisition, and adapting to a shifting EV landscape are all areas where dealers can control the outcome. The broader economic and political environment is a different story.
