Franchised dealerships’ views of the current market tumbled from a score of 62 in the third quarter to 52 for the fourth quarter. Independents also registered quarter-over-quarter declines in current market sentiment, and the industry as a whole rated conditions a 43, the second consecutive quarter with a negative view.
Smoke told Automotive News dealerships never expected the future market to be worse than the current market in any Cox survey from 2017 to the COVID-19 pandemic. Since then, it has happened several times. He said he feels it highlights dealership uncertainty.
“The uncertainty is principally around things that are completely out of their control, with no relief in sight,” he said. This is particularly the case for factors like the economy or interest rates, he added.
Interest rates and the economy are at the top of the list of factors that franchised dealers told Cox are hindering their business, knocking the issue of inventory down to third place.
Fifty-eight percent of those dealers said interest rates are a problem — up from 40 percent in the third quarter and from just 2 percent in the fourth quarter of 2021. Eighteen percent of dealers said consumer credit availability is an issue, up from 10 percent in the third quarter of this year.
“Higher interest rates are killing the vehicle market, which is exactly what the Fed wants,” a Chevrolet dealer told Cox.
The Federal Reserve has increased the target range for its benchmark interest rate — from 0 to 0.25 percent at the start of the year to 3.75 to 4 percent today, and it might increase the rate again next week. Those changes can produce a ripple effect on auto interest rates.
Fifty-seven percent of franchised dealers said the economy is a concern, up from 47 percent in the third quarter.
“Customers don’t know how bad the economy will get in the coming months and years, which makes them think twice about buying a vehicle right now,” a Mazda dealer told Cox.