What are the biggest concerns for car dealers heading into the fourth quarter? — Rebecca Rydzewskic

What are the biggest concerns for car dealers heading into the fourth quarter?  — Rebecca Rydzewskic

Cox Automotive recently launched its Q3 Dealer Sentiment Index, which analyzes car dealers’ views on the current market, economy and 90-day future outlook. Today to Inside Automotive, we 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 reflected in a major quarterly survey of both franchised and independent dealers. Rydzewski says the index is similar to the Consumer Sentiment Index, except it targets dealers specifically. She says it’s designed to measure how dealers see the market and how they see the market they’re in. Through a series of about 20 questions, Cox can gain insight into how dealers see the future and what the main drivers of that sentiment are. could be.

According to this year’s Q3 Dealer Sentiment Index, franchise dealers are reporting a more positive outlook for the market, although their numbers continue to decline. Rydzewski says the economy, inflation, rising interest rates and continued low inventory problems are the most common factors influencing dealer sentiment.

On sales, she says the numbers hold up remarkably well and dealers are positive about future profits, but notes dealers report higher costs as a link to inflation and rising interest rates.

Rydzewski points out that third quarter results tend to be more positive as new model years emerge. She says this year is different and dealers have a more pessimistic view. This pessimism holds even in the short-term fourth quarter, where revenue increases tend to bring positivity.

As for the ongoing inventory shortages, Rydzewski says the issue remains a concern for dealers. However, she points out that the stock index has risen from 13 in the last quarter to 31 for the third quarter. She says dealers report getting more support from manufacturers to get vehicles on the lot and provide a better product mix. So while the score is still low, dealers are cautiously optimistic.

Rydzewski says there is a distinct difference between the sentiments of franchise dealers versus independent dealers, mostly regarding profit. Franchise dealers rated their profits as 10-20 points above the threshold of 50, while independent dealers valued their profits about 10 points below the threshold. Franchise dealers report seeing more traffic, both in-store and online, and are more positive about used car sales.

According to Rydzewski, fixed activities are becoming increasingly important for dealers, especially when sales and revenues decline. She says consumers are holding and repairing vehicles for longer rather than trading them in. As a result, dealers are reporting additional staffing and more service equipment, marketing and mobile services are contributing to their positive view of fixed-operating 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 no one really knows where sales will be in the future, and the forecast has been pushed down several times this year.

Rydzewski says Cox Automotive has an army of performance managers who work directly with dealers to help them operate more efficiently. As for her, dealers need to focus on what matters most right now and stick to the basics to get through the current economic environment.

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