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The automotive retail sector is undergoing a notable shift in dealer sentiment as 2025 concludes. The Cox Automotive Dealer Sentiment Index (CADSI) indicates that various economic pressures and market fluctuations have led to a significant decline in dealer confidence. This downturn is marked by rising costs, inflated prices, and a pervasive sense of economic unpredictability, resulting in reduced demand.
Mark Strand, deputy chief economist at Cox Automotive, highlights a cautious outlook among dealers as the year ends. He notes, “The ongoing uncertainty in the economy, coupled with a decline in consumer confidence, has created a heavy weight on market sentiment. Compared to earlier in the year, current market dynamics are losing momentum. However, if interest rates decrease and consumer confidence rebounds, there is potential for recovery in 2026.”
Current market overview and trends
The fourth quarter of 2025 marks the conclusion of a challenging year for automotive sales. After a brief surge in vehicle sales due to tariffs in Q2 and a boom in electric vehicle (EV) sales in Q3, the market now shows signs of slowing down. Many dealers express concerns about potential declines in consumer spending and overall market activity.
Survey results from 919 dealers—492 franchised and 427 independent—reveal that the CADSI has fallen below the positive threshold for both current and future conditions. Conducted between October 22 and November 6, 2025, the survey indicates a notable decline in dealer confidence, underscoring the ongoing economic challenges.
Insights on dealer sentiments
For the first time in four years, the index rating for new vehicle sales has dipped below the crucial benchmark of 50, landing at a score of 49. This decline reflects a broader trend observed over recent quarters, with sentiment falling from 62 in Q2 to 58 in Q3. Sentiment for used vehicle sales has also decreased, particularly among independent dealers, who reported a score of 39.
Dealer traffic has dropped significantly, with the overall index plummeting to 31. In-person and digital engagement have both declined. Franchised dealers reported a score of 34, the lowest level in five years, while independent dealers experienced a slight decline in traffic and sales activity.
Looking ahead: potential for recovery
With new vehicle inventory on the rise, dealers maintain cautious optimism that conditions could improve if consumer confidence rebounds. The inventory index for new vehicles has increased for the second consecutive quarter, reaching 59; however, this remains significantly lower than the previous year’s score of 73. The tight inventory for used vehicles continues to be a pressing issue, with the index sitting at 43.
Economic concerns dominate dealers’ worries, with over half of the surveyed participants citing economic instability as their primary concern. This figure has risen from 44% in the previous quarter, indicating a growing sense of unease within the industry. The economy index itself has declined to 39, reflecting the overall sentiment towards economic conditions in the automotive market.
Electric vehicle outlook
Among the various factors influencing dealer sentiment, the outlook for electric vehicles has taken a serious hit, particularly following the expiration of federal tax incentives. Optimism for future EV sales has sharply decreased, with franchised dealers reporting a score of 24—down from 33 in the prior quarter. Independent dealers have been less affected by this shift, maintaining a consistently subdued view of the EV market.
As the industry transitions into 2026, uncertainty remains. While there is potential for recovery driven by favorable economic conditions, dealer sentiment leans toward caution, with many anticipating a challenging market environment in the coming months.