Automotive advertising has been picking up during the second half of the year, and as 2025 media investment plans are being drafted in the coming weeks there is a good indicator that trend may continue in the new year. The quarterly Cox Automotive Dealer Sentiment Index shows renewed optimism among U.S. automobile dealers. The quarterly survey shows that while current market conditions are still viewed as weak by many, dealers are increasingly optimistic about the future.
“The recent resolution of political uncertainty following the presidential election has cleared the path for a more optimistic outlook on future auto market conditions,” says Jonathan Smoke, chief economist at Cox Automotive. “Coupled with the potential for supportive measures such as tax rebates and the possibility of lower interest rates, dealers are feeling more hopeful about the road ahead as we move into 2025.”
The market outlook index, which measures dealers’ expectations for the auto retail market in the coming quarter, jumped to 54 in Q4 from 42 in Q3. That is considered a significant increase for this survey and Cox says it suggests that more dealers believe the auto market will be stronger in the next three months. One year ago, the index stood at just 41, one of the lowest readings in its history.
“We saw a surge in the outlook, technically the largest surge we have had quarterly in the history of the data, and it gets us back to Q2 2022 levels,” says Smoke. “It is the best fourth quarter since 2021, which was the most profitable quarter in dealer history.” The latest survey was conducted immediately following the national election in early November.
Despite the positive outlook, the current market index score of 42 indicates that a majority of dealers still view the current retail auto market as weak. This score is slightly better than one year ago but remains well below pre-pandemic norms and long-term averages. There are some differences among dealer groups. Cox says franchised dealers, who sell both new and used automobiles, are more optimistic than used-only independent dealers.
Factors holding back business include the economy, with 56% of dealers citing it as a significant concern, followed closely by interest rates at 52%. Cox says the data shows U.S. automobile dealers still see the economy as weak, which is a sentiment that has been consistent for the past two years due to elevated inflation and high auto loan rates.
What may help push more dealers toward advertising is customer traffic in Q4 continues to be seen as weak. They report declining in-person visits, although digital traffic gained marginally. Some dealers have opted to market electric vehicles, yet many think their sales will slide in the coming months with the expectation that the new administration will make changes to rebate programs and tax incentives. Cox’s survey shows dealers continue to suggest that national tax credits and incentives are having a positive effect on their EV sales.
“We are getting clear feedback that the tax credits are working in both the new and the used markets,” says Smoke. “This is something that could change fairly rapidly next year, so I think the diminishing outlook is directly tied to the at-risk status of the EV tax credits.”
Rebates and other incentive offers have often helped to drive some dealers toward more advertising. But as inventory improves, particularly on the new-vehicle side, most dealers tell Cox that they consider the current level of automaker-backed incentives small. The result is most dealers continue to feel more pressure to lower prices.
The MoffettNathanson AdTracker reported this week that automotive ad spending rose four percent during the third quarter. But it warned that threatened tariffs by President elect Donald Trump could reverse the trend in the new year. “While these actions may have far reaching macro-implications, sectors that comprise large portions of the ad market stand at particular risk, including autos and technology,” it said.
Download the Q4 2024 Cox Automotive Dealer Sentiment Index report HERE.
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