Auto dealers have issued a vote of no confidence to the current U.S. economy.

The Cox Automotive Dealer Sentiment Index for the fourth quarter of 2023 showed a sharp drop from Q3, which Cox analysts attributed to the ongoing adverse effects of high interest rates and a weakening economy on the automotive market, the two factors cited most by dealers as holding back their business.

The quarterly survey found dealer sentiment at all-time lows in several areas, following two quarters of relative stability.

The three-month market outlook index matched its record low of 41 (a score below 50 indicates more dealers feel the market will be weak than strong in the months ahead). For franchised dealers, that index fell to 46, down 12 points from Q3 and the lowest point in the index’s history. The index was down one point to 40 among independent dealers.

The Q4 current market index declined five points to 40, its lowest level since Q2 2020. It marks the sixth consecutive quarter with overall dealer sentiment below the 50 threshold, and the first time since Q2 2020 that franchised dealers’ sentiment has been below 50. Independent dealers’ sentiment, which has been below the 50 threshold since Q3 2022, came in at 38.

“The low scores in the latest survey indicate a challenging market with weak prospects,” Cox Automotive chief economist Jonathan Smoke said in a news release. “Many auto dealers are seeing their profits decline from record highs in 2021 and 2022, and they’re feeling the pinch from high interest rates.

“Their expenses have gone up significantly and the downward pressure on pricing has cut into their margins. Clearly, the market dynamics are much more challenging for automobile dealers and especially franchised dealers than the market of just one year ago.”

Profits, traffic down while costs continue to climb

Another historic low was recorded in the overall profits index, which plummeted to 37, the lowest point on record with the exception of the COVID shutdowns in Q2 2020. That index has been falling steadily since reaching its all-time high of 60 in Q3 2021.

The profits index for franchised dealers dropped seven points from the previous quarter to 51, and among independents it sank to 32 — their ninth consecutive quarter below 50.

Dealership traffic has also been sinking, with dealers overall ranking it down five points from Q3 at 30 on the 100-point scale — 27 for independent dealers and 40 for franchises.

Meanwhile, dealers said operating costs continue to rise, with the Q4 index at 74, marking nine straight quarters above 70. A score greater than 50 indicates costs are growing.

Used and new sales environments sagging

While used inventory availability rose for the second consecutive quarter, dealers viewed the used-vehicle sales environment pessimistically, with the overall index sagging to 39. That’s its lowest level ever, other than the pandemic quarter of Q2 2022 and down from 44 the previous quarter.

Franchised dealers were still slightly on the optimistic side at 51, though that was far down from Q3’s 58, while independents scored the environment substantially lower at 35. All of those scores are well below pre-pandemic levels.

After four quarters of improvement, the new-vehicle sales environment index dropped eight points to 51, one point below a year ago and less than every pre-pandemic measurement. OEM-backed incentives remain small, according to the index, down two points to 26.

Dealers indicated they are also facing pressure to lower prices — especially franchised dealers, whose index shot up seven points from Q3 to match independents’ score of 63.

Interest rates (65%) and the economy (61%) were by far the top two obstacles mentioned by dealers, followed by market conditions (48%), credit availability for consumers (34%), limited inventory (33%), political climate (32%) and expenses (31%).

Dealers expect EV sales to drop

A year ago, franchised dealers felt positively about their EV sales, with an index score of 61. Now, though, Cox’s Q4 report showed that number dropping 11 points to 50, while the overall dealer index sank to 48.

And asked about the outlook for EV sales over the next three months, both franchised and independent dealers said they expect them to decline, with franchises scoring 47 — down nine points from Q3 and 17 points year-over-year — and independents at 40. The overall score of 42 is down 11 points year-over-year and five points from the previous quarter.

All of those numbers are the lowest since the EV question was added to the survey in Q2 2021.

“The excitement that existed a year ago around EVs has definitely faded,” Smoke said. “Although EV sales are growing, supply is growing faster. The EV transition is requiring more effort from dealers than before, so it makes sense that enthusiasm has declined.”


The Q4 2023 Cox Automotive Dealer Sentiment Index is based on a survey of 1,036 U.S. auto dealer respondents, comprised of 561 franchised dealers and 475 independents. The survey was conducted from Oct. 24 to Nov. 6, 2023.

Dealer responses were weighted by dealership type and sales volume to represent the national dealer population.

For each aspect of the market surveyed, respondents are given an option related to strong/increasing, average/stable or weak/decreasing, along with a “don’t know” opt-out.

Indices are calculated by creating a mean score in which:

Strong/increasing answers are assigned a value of 100.

Average/stable answers are assigned a value of 50.

Weak/declining selections are assigned a value of 0.

Respondents who select “don’t know” at a particular question are removed from the related index calculation.