A sharp rebound in optimism for the spring selling season has lifted the spirits of U.S. auto dealers even as current market conditions remain challenging. The Q1 2026 Cox Automotive Dealer Sentiment Index (CADSI) reveals a significant jump in future expectations, pushing the overall sentiment index to its highest level in a year, even as dealers grapple with declining customer traffic, squeezed profits, and a continued cooling of sentiment toward electric vehicles (EVs).
The survey, which polled 1,031 U.S. auto dealers, found that while the current market index rose slightly to 41 from a near-record low of 38 in Q4 2025, it remains below the 50-point threshold, indicating that a majority of dealers still view present business conditions as weak. This sentiment is underscored by a profit index that declined four points to 32 and a customer traffic index that fell to 28, its lowest point since the pandemic era.
However, the outlook for the next three months tells a much different story. The future market index skyrocketed to 56, a dramatic increase from 42 in the previous quarter. This 14-point jump signals that a majority of dealers are confident that market conditions will improve as winter thaws and tax refund season gets underway.
“Our dealer sentiment index got its typical ‘spring bounce’ in Q1,” said Mark Strand, deputy chief economist at Cox Automotive. “While current market conditions are still challenging, the sharp improvement in outlook reflects growing hope for a stronger spring selling season. Dealers are looking for relief from interest rates, a good spring selling season and a pickup in consumer confidence to help turn that optimism into sustained momentum.”
A Market of Contrasts
The overall market improvement was largely supported by the used-vehicle side of the business. The used-vehicle sales index rose two points to 44, reflecting a modest but welcome uptick in sentiment. In contrast, new-vehicle sales sentiment softened further, with its index declining to 48, down from 49 in the fourth quarter and 54 a year ago.
One of the most striking findings from the Q1 report is the sharp deterioration in dealer sentiment toward EV sales. The EV sales index plummeted to 33, a significant drop from 42 in the prior quarter and 47 just one year ago. This represents the lowest reading for EV sales sentiment since the metric was introduced in Q2 2021, signaling growing dealer concern about the marketability and profitability of electric vehicles. The data suggests that dealers see a path forward, but it is one paved with specific economic and operational challenges.
Economy, Costs, and Weather Top Dealer Concerns
When asked about the factors holding back their business, 52% of dealers cited the economy as their top concern, a figure that is up from 45% one year ago. The cost of running their business also remains a significant headwind, with the cost index holding at 71, unchanged from a year prior.
Adding to these persistent pressures, weather emerged as a major factor in the first quarter. Widespread winter storms during the survey period pushed “Weather” to the No. 5 spot on the list of concerns, cited by 32% of dealers. Interestingly, concern over interest rates, while still present, declined sharply as a primary factor, falling from 52% in Q1 2025 to 34% in the current report.
Inventory levels presented a mixed but more manageable roadblock. The new-vehicle inventory index eased slightly to 56, suggesting that supply is becoming more balanced with demand. On the used-vehicle side, inventory remained tight but stable, with the index ticking up two points to 45.
Navigating the Road Ahead
While dealers are contending with very real headwinds in the present—from weak foot traffic to eroding profits and a challenging EV market—their gaze is fixed firmly on the promise of a better spring.
“Typical spring market is always strong,” said one Toyota dealer quoted in the report. “We are starting to see it already. And tax time brings new shoppers out.”
The sharp rebound in future sentiment underscores a resilient belief in the seasonal patterns of the auto market and a hope that improving economic conditions will translate optimism into tangible sales. As the industry heads into its critical selling season, the ability to convert this hopeful outlook into sustained momentum will be the ultimate measure of success.
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