Car Dealers Are Less Pessimistic, But Tariff Uncertainty Looms

An uncertain time

Car dealerships are feeling slightly better about the market than they did last year, but lingering concerns over tariffs and economic instability continue to weigh on the industry. According to the latest Cox Automotive Dealer Sentiment Index, dealers remain pessimistic overall, with many uncertain about what the near future holds.

A market on shaky ground

Cox Automotive surveyed 969 dealerships in early 2025, converting responses into numerical values where 50 represents a neutral outlook. This quarter, the index for current market conditions landed at 44, reflecting ongoing pessimism but marking an improvement over last year’s score of 42. New vehicle sales have provided some optimism, with dealers rating them at 54, up from 52 a year ago. Used car sales, however, remain weak, with a rating of 45 — better than last year’s 40 but still in negative territory.

The tariff wild card

One major source of uncertainty is the Trump tariff saga. Since taking office, President Trump has twice delayed implementing tariffs that could raise car prices by as much as $9,000. If they take effect on April 2 as currently planned, they could severely impact dealer profitability and consumer demand.

Jonathan Smoke, Cox Automotive’s chief economist, noted that while dealers expressed mild optimism when surveyed in late January and early February, the shifting tariff landscape could rapidly change their outlook. “At the time of this survey, U.S. automobile dealers were feeling pretty good about the market,” Smoke said. “Considering the administration’s current and shifting tariff stance, how long this momentum will last is unclear.”

Profitability is still a struggle

The index measuring dealer profit expectations remains low at 34. While that’s a slight improvement from last year’s record low of 33, it’s far from a sign of robust health. Franchised dealers, backed by corporate resources, fared better with a score of 41, but independent dealers continue to struggle.

EV sales outlook dims

One surprising finding is a decline in dealer optimism about electric vehicles (EVs). The EV sentiment score dropped to 40, suggesting that dealers expect a slowdown in demand. This shift comes despite strong EV sales in recent years, hinting at a potential cooling of consumer interest or concerns over affordability and infrastructure.

Interest rates and insurance costs add pressure

Beyond tariffs, high interest rates remain the top concern among dealers. The Federal Reserve began cutting rates in 2024, but with a potential trade war brewing, it has since paused reductions. Dealers are also now citing rising car insurance costs as a growing challenge, marking the first time this issue has entered their top 10 concerns.

Final thoughts

While car dealers are feeling slightly better than they did a year ago, the industry is far from stable. Economic uncertainty, interest rates, and the looming threat of tariffs could quickly shift sentiment in the months ahead. For consumers, this unpredictability could mean more room to negotiate — at least until the industry finds solid ground.