For car dealers, a sunny sales outlook at the start of 2018 has been overshadowed by rising interest rates, shrinking customer budgets and cost increases. Their optimism for the next quarter lost 14 points to just 56 on a 100-point scale, according to the Cox Automotive Dealer Sentiment Index.
The report, based on a survey of more than 1,000 independent and franchise car dealers from April 30 to May 14, shows prospective buyers grappling with tight finances despite a Republican tax cut that many sales executives had expected to boost consumer spending. The biggest challenges they reported were overall auto market conditions, followed by limited inventory, buyers’ ability to obtain credit, and rising interest rates.
While higher rates and lack of credit affect demand, supply costs are also poised to grow. Trade groups that represent the auto industry have warned that tariffs on automobiles and parts, combine with duties imposed on steel and aluminum, are likely to hurt American businesses and curb the benefits of the 2017 tax cuts.