What are the top concerns for auto dealers heading into the fourth quarter? — Rebecca Rydzewski | Cox Automotive

Cox Automotive recently released its Q3 Dealer Sentiment Index, which analyzes the views auto dealerships have about the current market, economy, and 90-day future outlook. Today on Inside Automotive, we’re pleased to welcome Rebecca Rydzewski, Research Manager of Economic and Industry Insights for Cox Automotive, who dives deeper into the findings.

The Cox Automotive Dealer Sentiment Index is a measure reported from a large quarterly survey of both franchised and independent dealers. Rydzewski says the index is similar to the Consumer Sentiment Index, only it focuses specifically on dealers. She says it is designed to gauge how dealers are viewing the market, and how they view the market they are in. Through a series of about 20 questions, Cox can gain insights into how dealers view the future and what the key drivers of that sentiment might be.  

According to this year’s Q3 Dealer Sentiment Index, franchised dealers are reporting a more positive outlook about the market, even though their numbers continue to decline. Rydzewski says the economy, inflation, rising interest rates, and ongoing low inventory issues are the most common factors affecting dealer sentiments. 

As for sales, she says numbers are holding up remarkably well and dealers are feeling positive about profits going forward, but remarks that dealers are reporting higher costs as a tie-in to inflation and rising interest rates.   

Rydzewski points out that third-quarter results are typically more positive because new model years are coming out. She says this year is different, and dealers have a more pessimistic outlook. This pessimism holds up even into the near-term fourth quarter, where sales surges typically bring positivity.  

As for ongoing inventory shortages, Rydzewski says the issue remains a concern for dealers. However, she points out that the inventory index climbed from 13 last quarter to 31 for Q3. She says dealers are reporting receiving more support from manufacturers in getting vehicles on the lot and providing a better product mix. So even though the score is still low, dealers are feeling cautiously optimistic.   

Rydzewski says there is a marked difference between sentiments from franchised dealers versus independent dealers, mostly relating to profits. Franchised dealers marked their profits as being 10-20 points above the threshold of 50, while independent dealers put their profits about 10 points below the threshold. Franchised dealers report seeing more traffic, both in-store and online and are more positive about used vehicle sales.  

According to Rydzewski, fixed operations are becoming increasingly important for dealers, especially when sales and revenues are down. She says consumers are holding onto vehicles for longer and fixing them instead of trading them in. As a result, dealers are reporting additional staff, and more service equipment, marketing, and mobile services are adding to their positive outlook of fixed operations businesses.  

As a final note, Rydzewski says that amid economic turmoil and a looming recession, dealers need to focus on efficiency. She points out that nobody really knows where sales will be in the future, and the forecast has been moved down several times this year already. 

Rydzewski says Cox Automotive has an army of performance managers who work directly with dealers to help them work more efficiently. As far as she is concerned, dealers need to focus on what’s most important right now and stick to the basics to weather the current economic environment.   

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