Holiday incentives from automakers help franchised dealers, but hurt independent dealers selling nearly new used cars.

Despite a rise in November sales, U.S. auto dealers are less optimistic about the fourth quarter than they were last year at this time. However, they are optimistic about the next 90 days, mirroring the sentiment they expressed last year at this time.

According to the Q4 2019 Cox Automotive Dealer Sentiment Index, U.S. dealers continue to view the current market as negative, with an index score of 47. The slight decrease from Q3’s current market index of 48 was not statistically significant.

The index reading of 47 indicates that slightly more dealers feel that the current market is weak compared to the number who feel the current market is strong.

(U.S. new vehicle sales rise in November)

The current market sentiment skews more positive for franchised auto dealers, operations that sell both new and used vehicles, compared to independent dealers, those who focus only on used-vehicle sales, the survey reveals, noting that this is the norm.

The gap narrowed this quarter with franchised dealers becoming less positive – decreasing from 56 in Q3 to 51 in Q4 – while independent dealers remain negative at 46, unchanged from Q3.

“The fourth quarter seems to be revealing an important turning point for dealer sentiment especially compared to this time last year when views of the future dimmed,” said Cox Automotive Chief Economist Jonathan Smoke.

“Independents are more optimistic about the next 90 days, and that improvement is related to increasing used-vehicle inventory. Franchises have similar positive views of the future as they did at the end 2018. However, dealers remain concerned about the economy as well as the usual seasonal decline that impacts parts of the country more severely than others.”

(Post-Thanksgiving weekend key to November auto sales)

When it comes to views of the future, franchised and independent dealers become more of the same mind in Q4. Franchised dealers’ sentiment scored 54, down from 57 in Q3, while independents’ sentiment increased from 49 to 51, an improvement that is likely driven by to growing used-vehicle inventory as well as increasing profits.

The overall future index score of 51 in Q4 is better than last year and equal to Q3, signaling a better end to 2019 and sustainable opportunities expected in the used-vehicle market, according to Smoke.

For franchised dealers, the current new-vehicle sales index at 56 was down compared with last year, but slightly higher than last quarter. The new-vehicle sales index remains above 50, which suggests a good market, and that’s supported by the monthly sales results. Franchises also continue to see the used-vehicle sales as stronger than new.

The franchised used index this quarter saw a statistically significant decrease to 66 from 73 in Q3, but the score still represents a good market. This decline reflects a seasonal pattern as well as high incentives and discounting so often offered on new vehicles at the end of the year. These efforts to move out new vehicles at the end of the year hamper sales of nearly new used-vehicles.

For independents, the used-vehicles sales index in Q4 remained slightly negative at 49, the same score as last quarter and slightly above Q4 2018. Factors influencing a pessimistic view of the current market are the perception of Market Conditions, Competition and Credit Availability for Consumers.

(Toyota riding wave of new product launches)

When asked about factors holding back the business, dealers in aggregate remained fairly consistent in Q4, although Economy entered the Top 5 and pushed Expenses to the sixth spot. Market Conditions remained in the top spot as the most cited negative factor for both groups. Competition stayed in second place for both as well.

Don't miss out!
Get Email Alerts
Receive the latest Automotive News in your Inbox!
Invalid email address
Send me emails
Give it a try. You can unsubscribe at any time.