What the Improved Cox Dealer Sentiment Index Signals for Auto Dealers

Analyzing the Latest Improvements and Ongoing Warnings for Auto Dealers

The first Cox Automotive Dealer Sentiment Index (CADSI) of 2025 has brought a glimmer of hope to the U.S. auto dealership landscape. With an upward shift to an index score of 44 from 42 in the previous quarter, many dealers find themselves feeling cautiously optimistic. However, this sentiment is complicated by significant external factors such as the administration’s shifting tariff stance and persistent economic concerns.

Mixed Sentiments Among Franchised and Independent Dealers

A deeper look into the survey reveals a diverging outlook between franchised and independent dealers. While franchised dealerships reported a positive sentiment uplift with an index score of 54, independent dealers remain skeptical, reflecting a weaker market perception with an index of 42. This divergence raises questions about the underlying dynamics affecting these two dealer groups in the current market.

Market Outlook: Optimism Amid Clouds

Interestingly, the market outlook index saw an increase, rising to 58, marking the highest score since 2022. This signals that more dealers are anticipating a strong market in the upcoming months. Jonathan Smoke, chief economist at Cox Automotive, expressed that a combination of healthy inventory levels and consumer urgency to purchase are contributing positively to dealer sentiment at this juncture. However, he cautioned that the sustainability of this momentum is questionable in light of evolving tariff policies.

Economic Factors Loom Large

Despite the improved sentiment, economic concerns hang in the air. Although the current index for the economy rose to 42, this remains substantially lower than pre-pandemic levels (57 in Q1 2020). Dealers cite interest rates and overall economic wellbeing as significant hindrances to their business growth. Notably, 52% of surveyed dealers indicated that high interest rates are holding them back from expanding their operations—a sentiment reflecting the wider financial anxieties gripping the sector.

Choosing Between New and Used Vehicles: A Strategic Outlook

The survey also highlighted intriguing data around vehicle sales. Franchised dealers reported a new-vehicle sales index of 54, while used-vehicle sales have seen consistent improvement, rising for five consecutive quarters. While the used-vehicle sales index hit 45, the prospect of independent dealers appears bleaker, with sentiments suggesting continuous inventory challenges.

The Rise of Electric Vehicles: Optimism vs. Reality

The electric vehicle (EV) sector presents another layer of complexity. Even with a summoned sense of better prospects, many dealers remain cautious about the EV market's future, with expectations indicating potential decline rather than growth. Franchised dealers rated their outlook for EV sales higher than independents but still hint at an overall pessimistic approach.

Conclusions and Next Steps for Dealers

The contrasting perspectives amongst dealers highlight that while there are reasons to feel optimistic about the current market conditions, significant challenges linger. Interested dealers should focus on closely monitoring external factors like tariffs and interest rate fluctuations while navigating their unique customer bases. In the face of uncertainties, implementing flexible strategies to adapt to changing market dynamics could be key for success in the coming quarters.

As the sentiment landscape continues to evolve, dealers are encouraged to stay proactive and aware of the conditions affecting both consumer behavior and market dynamics. This vigilance will be essential for thriving in an increasingly complex automotive environment.