Dealer sentiment on current market conditions improved for the second straight quarter in Q2 2026, but expectations for the next three months fell sharply as economic concerns and consumer demand worries mounted, according to Cox Automotive’s quarterly dealer sentiment survey.
The Cox Automotive Dealer Sentiment Index rose to 43 in Q2, up from 41 in Q1. The gain keeps the index below the 50 mark that separates positive from negative sentiment, meaning most dealers still view conditions as weak despite the improvement. The forward-looking index dropped to 47 from 56, falling below positive territory for the first time since Q4 2025.
The split between current conditions and future outlook reflects what dealers saw in the field versus what they expect next. March and April sales were healthy enough to lift present-tense sentiment. Inflation, elevated fuel costs, and geopolitical uncertainty are what dealers cited when asked about the months ahead.
The gap between franchised and independent dealers widened in Q2. Franchised dealers reported current market sentiment of 53, up 5 points from Q1 and comfortably in positive territory. Independent dealers improved to 40 but remain well below the threshold. Both dealer types reported declines in the three-month outlook, with independent dealers seeing a sharper drop.
Customer traffic rebounded 8 points to 36 in Q2 from near-record lows the previous quarter. The index remains below what Cox Automotive considers strong, but traffic is now closer to year-ago levels. Franchised dealers reported stronger performance, particularly in online traffic. Independent dealers saw gains but continued to lag.
Profitability edged higher, rising to 36 from 32 in Q1, but remains below last year’s level and well below 50. The cost index climbed to 74, its highest reading in more than a year, pressuring margins even as conditions improved on the sales side.
New-vehicle sales sentiment improved to 53 in Q2, reflecting the spring selling season, though the figure remains below year-ago levels. Used-vehicle sales sentiment held at 44, unchanged from Q1 and lower than a year ago. Franchised dealers reported strong used-vehicle conditions; independent dealers continue to face challenges. New-vehicle inventory for franchised dealers held steady, while used-vehicle inventory remained tight, particularly for independent dealers.
EV sentiment showed early signs of stabilization after a period of decline, with both dealer groups reporting modest improvement from recent lows. Independent dealers are seeing improving opportunities in the used EV market, supported by better pricing and availability. Franchised dealers remain less optimistic, reflecting ongoing concerns about current and future EV sales. Overall EV sentiment in Q2 remains below levels considered strong.
Dealers identified the economy as the top factor holding back business, cited by 55% of respondents, up from 52% in Q1 and 51% a year ago. Market conditions ranked second at 40%, unchanged year-over-year. Political climate moved up to third at 36%, rising from fifth position in Q2 2025 and Q1 2026, as dealers pointed to geopolitical tensions and policy uncertainty. Expenses and interest rates rounded out the top five at 33% and 32%, respectively.
The Q2 2026 index is based on responses from 958 dealers, including 502 franchised and 456 independent dealers, surveyed between April 21 and May 4, 2026. Index scores assign 100 for strong or increasing conditions, 50 for average or stable, and 0 for weak or decreasing. The margin of error is approximately plus or minus 3 percent.
The data shows that the spring bounce occurred on schedule, and the summer outlook is weaker than dealers would like. The forward-looking index dropping below 50 is the number worth watching.
Source: Cox Automotive. Images courtesy of Cox Automotive.
