Tariffs, economy drive a wedge in dealer sentiment for Q2 – survey

Dealers are bracing for what could be a rocky second half of the year. (3 min. read)

Author

Marcus Amick
May 23, 2025

Cox Automotive’s Dealer Sentiment Index for Q2 reveals mixed feelings about the current market—spanning high optimism about the recent sales momentum to looming uncertainty about the tariffs.

The details: The report—drawn from a national survey of 977 dealers—shows a slight dip in sentiment, with some stark differences between franchised and independent retailers.

  • Overall, the market sentiment index was at 42, down slightly from 44 in Q1, indicating that more dealers see the market as weak, not strong.

  • Franchised dealers reported improved conditions with a score of 56, up from 54 in the first quarter of 2025. 

  • Independent dealers remained a lot more cautious—with a score falling substantially lower than franchised dealers at 37. 

Why it matters: Franchised dealers are riding a wave of new-vehicle inventory and stronger sales momentum, while independents (who rely more heavily on used inventory and discretionary buyers) are feeling the squeeze. Add in rising concerns about tariffs and economic instability, and it’s clear: the second half of 2025 could expose more volatility in profits, pricing, and inventory strategy across the board.

Zooming: Three of the Cox dealer sentiment survey’s core market indicators—customer traffic, profitability, and inventory—speak to dealers’ optimism about the current market.

  • The customer traffic index rose to 37, up from 33 in Q1—with franchised dealers reporting a 10-point jump in in-person visits – the largest increase since the metric was introduced in Q3 2022.

  • The profit index climbed to 39, the highest in over a year, with franchised dealers climbing from 41 to 52 and independent dealers rising three points to 35.

  • The new-vehicle inventory index dropped to 50, the lowest since late 2022, while used-vehicle inventory fell to 41.

That said, sentiments about the road ahead were a bit more bleak for dealers, with the market outlook index falling from 58 to 45—with independent dealers seeing the steepest decline, dropping 15 points to 42 and franchised dealers falling to 56 from 61 in Q1.  The economy is a major concern, mentioned by 51% dealers, 42% interest rates, with tariffs on imported vehicles and parts climbing up to the fourth and fifth top concerns for retailers. 

What they’re saying: “Dealers have a front-line view of the U.S. auto market, which appears to be at an inflection point. The recent sales pace has been a positive, lifting current market sentiment higher for franchised dealers. But as we’ve said before, 2025 is going to be a roller coaster for this industry, and the market could be a lot more hair-raising in the months ahead,” said Jonathan Smoke, Chief Economist at Cox Automotive.

Bottom line: Despite a brief period of high optimism, the uncertainty of the economy and tariff-related challenges could signal a fragile retail landscape that could affect inventory planning, pricing strategies, and sales momentum in the second half of 2025.

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