Consumer Sentiment, EV Momentum, and Economic Volatility

Consumer sentiment is wavering as higher gas prices, global conflicts, and interest rate uncertainty intersect with an auto market entering the spring selling season. 

From geopolitical risk and fuel costs to strengthening used EV performance and growing macro uncertainty, this episode breaks down the forces reshaping demand, pricing power, and strategy across the automotive market as the year unfolds:

• Consumer sentiment, gas prices, and economic uncertainty: Rising oil prices stemming from Middle East tensions and shipping disruptions are pressuring sentiment and inflation expectations. We explore how volatility in headlines, consumer sentiment, and fuel costs could influence purchasing behavior in the months ahead.
• Used EV momentum and wholesale pricing signals: Off-lease EV supply is rising, with used EV sales and values showing notable strength in the wholesale market. We unpack what this momentum signals for dealers navigating affordability constraints, inventory decisions, and shifting consumer preferences amid uncertainty around fuel prices.
• Federal Reserve outlook and market volatility: With no near-term rate cuts expected, the Fed remains constrained by inflation risks tied to energy prices and global conflict. We explore how interest-rate uncertainty, GDP revisions, and recession concerns are shaping planning assumptions for 2026.

The Auto Market Brief delivers timely data, clear context, and practical insight to help industry leaders make smarter decisions—what’s happening now, and what’s coming next.

The Auto Market Brief is powered by Cox Automotive. For more industry insights and expert perspectives, visit our Insights Hub at https://www.coxautoinc.com/insights.

Creators and Guests

Host

Erin Keating

Erin Keating is an Executive Analyst and Senior Director of Economic and Industry Insights at Cox Automotive. She brings 30 years of professional experience, including 14 years in the automotive industry, providing analysis on market conditions, automaker performance, and consumer demand shaping the economics of the new-vehicle market. Erin spent 10 years with Audi of America, including leading Audi Motorsport North America, informing her perspective on both commercial strategy and competitive dynamics.

Guest

Jeremy Robb

As chief economist at Cox Automotive, Jeremy Robb oversees the enterprise-level economic outlook, monthly forecasts, client advisory, media briefings and the strategic integration of data from the company’s extensive retail and wholesale platforms. Jeremy leads Cox Automotive's Economic and Industry Insights team, working directly with clients and executive leaders in sales, strategy and finance. He draws on his background helping companies consume data and insights to make better business decisions. He has been focused on finance and strategy for large corporations in the financial services and automotive industry for the past 20 years. Jeremy joined Cox Automotive in 2018 after spending 6 years at Nissan where he led functions in finance and remarketing.

What is The Auto Market Brief?

The Auto Market Brief, powered by Cox Automotive, breaks down the latest trends and forecasts shaping the automotive industry. The show is hosted by Cox Automotive Executive Analyst Erin Keating, coupling years of experience translating data and trends with the data and industry insights of the largest automotive services and technology provider.

Joined by other Cox Automotive experts and outside guests, you’ll get data-driven insights and industry outlooks from some of the industry’s leading voices.​

Erin Keating: 00:03

Welcome to the Auto Market Brief from Cox Automotive. Each episode, our experts and special guests break down the latest trends, insights, and news shaping the automotive market. We'll give you the information that truly matters so you can make smarter decisions and drive your business forward. Hello, and welcome back to The Auto Market Brief. On this episode, we'll be picking up right where we left off last week by checking in on consumer sentiment and gas price trends given what's happening with Iran and The Middle East.

Erin Keating: 00:35

As usual, Jeremy, our chief economist, will kick us off with how this might be changing, for the market for used EVs given what we're seeing in the Manheim data, as well as cover latest market trends and an update from the Fed. Finally, I actually was able to attend the Bank of America Auto Summit this week in New York and wanna make sure I'm bringing some insights back from that conference and help our listeners understand what that has to, say about the car market right now that we're in. So let's jump right in, Jeremy. Glad to have you back.

Jeremy Robb: 01:05

Yeah. Thanks for having me. Good to In be the studio.

Erin Keating: 01:08

In the studio, live and in person. Yeah.

Jeremy Robb: 01:10

Yeah. Yeah. It's always fun to talk about things at this time of year. You know, we're in the spring market, and that is really applicable for the wholesale market in automotive and the retail market too, but it's also very applicable for the economy overall with tax refunds and everything going on. And then we have the really interesting, you know, related piece with the Middle East conflict happening right at the time where everything from the tax refund season is heating up.

Jeremy Robb: 01:37

And so trying to read through what both of those things mean is difficult, but we need to do it. Right? So we we see actually some things that make some people scratch their head. Right? So if we think about where the consumer is right now, you know, we've seen tax refunds be pretty strong so far this year.

Jeremy Robb: 01:56

They're up the average refund's up about 11% year over year, but we haven't seen as many people get refunds as we're expecting to get refunds Okay. Versus where it usually is at this point in time. Sure. And that's a really important factor because what it means is that we're likely to see the positivity from it last for longer

Erin Keating: 02:15

Yeah.

Jeremy Robb: 02:16

Right. As those come in. And it's not surprising either because of some of the changes to the tax code. Right. Impacts people that typically file a little bit later.

Jeremy Robb: 02:24

Sure. So that pushes that back a little bit. So that's giving us maybe a longer tail

Erin Keating: 02:28

Sure.

Jeremy Robb: 02:28

Of what's going on with tax season. With consumer sentiment, you know, right now, year to date, it's it's down about I'm sorry, since the February, right, given everything that we're seeing. It's down about 4%, which doesn't really sound like a lot, but it's it's down 4%. It wasn't really great. Hadn't recovered a lot either.

Jeremy Robb: 02:52

But gas prices are up 30% as of this morning since the February. And I think a lot of people a lot of people in the in the economy and worldwide, when the Middle East conflict first started, were anticipating and based on things that the administration said too, that it would end pretty quickly.

Erin Keating: 03:08

Right.

Jeremy Robb: 03:09

And now, you know, it hasn't yet ended. And if anything, it's escalating. And so there there are some definite, you know, things that we need to consider of how it's going to impact the economy and the automotive market overall. Sure. At the longer it it kinda stays there.

Erin Keating: 03:24

And how difficult I mean, it's interesting that you mentioned the tax refunds being a little bit behind schedule, if you will, meaning that we'll see a longer tail here. Mhmm. But we also know that a lot of our numbers are going to be a little lumpy this year because last year, of course, in March, we experienced a huge pull ahead anyway because of tariffs. So there's probably gonna be a lot of work for you specifically and the team to kinda really try to flatten things out to see what are we really seeing between last year and this year, the trends. Right?

Jeremy Robb: 03:49

Yeah. Last year, definitely pull ahead. You know, anything this is a a really important point for answering your question, but in terms of thinking about it too. Anything that adds to inflation expectations usually causes consumers to act more quickly

Erin Keating: 04:04

Right.

Jeremy Robb: 04:04

Today. Right. Right? And so I think one of the things that is happening right now with even you could call it oil prices and the expectation that maybe oil is going to lead to higher inflation down the road for different things in the economy is leading some people maybe to pull the trigger on some things quicker today than they are before. Now in terms of the automotive market and what we saw last year, new vehicle sales year to date are still down about 1%.

Jeremy Robb: 04:28

So, you know, we've we're doing better than we were, like, in January and February time periods. Right. And we've seen new vehicle sales rise for about five weeks in a row on on both the new and the used car side. So that's good. Used vehicle sales are running hotter.

Jeremy Robb: 04:43

But both of those, especially as we get into the end of, you know, March and into April into q two, it'll be really important to track that because last year was its own year.

Erin Keating: 04:53

Right. You

Jeremy Robb: 04:54

know? So, lot of implications from those kind of things.

Erin Keating: 04:56

So, sort of tracking against where do we think it's going to be this year versus saying year over year comparison because a year over year comparison is where it might get a little bit out of whack.

Jeremy Robb: 05:05

Yes. The seasonals, you know, if you think about seasonality in terms of whether it's pricing or or vehicle transactions last year highly impacted

Erin Keating: 05:14

Right.

Jeremy Robb: 05:14

By the timing of the tariffs. And that ended up making q four a little weaker Right. Last year overall. So Right. Now we're moving into to this year.

Erin Keating: 05:23

So what are you watching mostly as this unfolds? Where are we with our Manheim numbers, used EVs, etcetera?

Jeremy Robb: 05:29

Yeah. So used EVs, it's a it's a great time to kind of, like, put the context on used EVs. We we've talked about a lot of we're right at the the critical point for seeing off lease EVs come back into the market more. The first place you see that is in the wholesale data. Mhmm.

Jeremy Robb: 05:47

Right? They come into wholesale first, and then they come into the retail market overall. We are seeing used EV sales on a daily basis over where they were last year, up about 35% year over year. So, you know, there's more wholesale, there's more of them there, and they're running higher. And then the rest of the market is actually down about a point.

Jeremy Robb: 06:08

So there's a little bit of a shift. Part of that is supply driven, you know, anytime, like, the market can only buy what the market can buy.

Erin Keating: 06:14

Right.

Jeremy Robb: 06:15

Right? And that that's kind of the point we've been trying to make to dealers for the last few years moving in 2026 that, you know, if you are dependent on a three year old car, cars you're gonna get your hands on are EVs. Right. But we're also seeing, this is important too, that values are are pretty strong.

Erin Keating: 06:30

Right.

Jeremy Robb: 06:30

The Manheim index we released earlier this week had a pretty good move. Not pretty good, actually, really strong move.

Erin Keating: 06:36

Mhmm.

Jeremy Robb: 06:36

For the March, we saw the index was up half a point on a seasonally adjusted basis. Okay. And seasonally, we are expecting to see higher prices. So typically, that is pulled down. So what normally happens is we have a flat read in March from the index.

Erin Keating: 06:52

Okay.

Jeremy Robb: 06:52

But we're up half a point. And EVs are actually up more from the February than the non EV market is. EVs are up about I think it's a little, like, close to 3%. Okay. Since since the February, and then the rest of the market's up about 1%.

Jeremy Robb: 07:07

So a little bit of a change there too. So is the change in The Middle East already impacting the price of EVs in the wholesale market? That's pretty hard to know. Right. Is it maybe making some dealers think, oh, this is going to drive a little bit more demand, and so there, we're gonna we're gonna bid on those vehicles a little bit more?

Jeremy Robb: 07:26

That may be part of it. Sure. Yeah.

Erin Keating: 07:28

So wholesale usually gives us a picture of two things. One, what are dealers expecting, but also what are dealers looking for? So they might be coming because they're getting more demand for it. Right?

Jeremy Robb: 07:37

Mhmm.

Erin Keating: 07:37

So how is this playing out and what we're actually seeing in the retail side of the sales?

Jeremy Robb: 07:41

Yeah. The retail market, I you know, I think looks pretty good. On the the new car side, we talked about, you know, I think you talked about too in, like, January, February is a little bit weaker. Mhmm. We had the dealer sentiment index.

Jeremy Robb: 07:53

Right? That was taken and and it really showed the impact of traffic and weather

Erin Keating: 07:58

Right.

Jeremy Robb: 07:58

Overall. I think that, you know, worry has subsided throughout the industry right now because we've definitely seen really, every week since the January, we've seen trends for new vehicle sales and used vehicle sales move higher even though they're still not necessarily higher than they were last year. Right. And on the new vehicle side too, one of the interesting things we've also seen was that year over year, we had less units on the ground

Erin Keating: 08:22

Mhmm.

Jeremy Robb: 08:23

Almost every week this year so far until this week. Mhmm. And then it changed, and now we're up year over year. And and some of that is the, hey. We pulled EVs out of the marketplace.

Jeremy Robb: 08:33

We pulled some of these plug in hybrids out, things like that. So how's the new car market responding on a production level to what's sitting on the ground? Now, we've just gotten to a point where we've got a little inventory that's up a little bit on a year over year basis, but sales are starting to come in too, so we've seen day supply down. All that stuff is actually pretty seasonally normal Right. For this time of year.

Jeremy Robb: 08:53

On the used car market, we were seeing pretty good strength already in in relative strength in the latter part of January. It kind of flattened off a little bit in February, and then it's picked back up again.

Erin Keating: 09:05

Gotcha.

Jeremy Robb: 09:05

So where we go from here is really interesting because of the point you made earlier about, you know, last year and the tariffs and what happened. And so the Manheim index from a wholesale demand and dealers where they're looking to get inventory, the strongest week of the month on the used retail market, strongest week of the year is that March. That's when we have the peak, and we see everything from the rest of the year kind of flatten out. That's just seasonal what happens out. And so, typically, the wholesale market can peak in the March.

Jeremy Robb: 09:34

We were kinda trending that way last year, and then the tariffs came in, and it extended what we saw with valuations. This year and our when we we call this our MMR retention index, it measures where prices are every week relative to week one. The overall index is sitting at right about a 106%.

Erin Keating: 09:53

Okay.

Jeremy Robb: 09:54

That puts it over four points ahead of where it normally sits.

Erin Keating: 09:57

Yeah.

Jeremy Robb: 09:57

So, like, if you think about prices running hotter on the wholesale markets, definitely hotter, and not just any one category, really. It's like the two year old, the three year old Right. Pretty strong, but some older vehicles are pretty strong too. Sure. So so really interesting trends, but then we're gonna go into the summer, the USMCA renegotiations, and then we're gonna have this fiscal stimulus kind of behind us from the tax refunds.

Jeremy Robb: 10:22

And so I think the second half of the year is where a lot of people see that uncertainty come in more.

Erin Keating: 10:26

And how is pricing power holding up on the retail side?

Jeremy Robb: 10:29

Yeah. I mean, it's okay. We saw incentives pick up, you know, in February a little bit, but there's still nothing, like, to to worry about from a And I was talking with a a big client just this week about where incentives are and and the fact that last year, we had really good new vehicle sales without incentive growth. Right. And and when you have incentives go higher, what happens to wholesale and and used retail prices?

Jeremy Robb: 10:52

They go down.

Erin Keating: 10:53

Right.

Jeremy Robb: 10:53

Those things are very correlated. So lower incentives are supportive of the retail market overall. And then on the used side, we're still living through this, and we will continue to that I call it the thing going through the snake. Right? Right.

Jeremy Robb: 11:06

Is that no production or low production from 2021 in that time period. And really, as we go out further from the pandemic, it just impacts older cars Right. And whatever those demand levels are for those vehicles. So that being said, it's fairly supportive of, you know, seeing at least normal depreciation and not accelerated depreciation from what a lot of people look for.

Erin Keating: 11:26

Right. Okay. Great. Well, we did have a big update from the Fed this week or

Jeremy Robb: 11:31

We did. Maybe Just yesterday.

Erin Keating: 11:32

Maybe not Yeah. So big, or unexpected. But, yeah, tell us a little bit about what you learned there.

Jeremy Robb: 11:38

Yeah. To your point, definitely not expected. No one expected to see anything, and, you know, we didn't get a rate cut. Right. Obviously, I think one of the bigger things that came out of that is they made a nod to the uncertainty from what's happening in The Middle East, which, you know, anybody that thinks about this stuff is gonna put their hat on with that.

Jeremy Robb: 11:55

The longer that continues to go on for, the more it gets built into economic projections that people put together, and then also consumers' expectations of longer inflation. And the problem with oil going up as much as it goes up is that oil has this tendency to change price levels of a lot of different things, and it can do it fairly quickly. Whereas other things have a much longer lag, you know, transportation and

Erin Keating: 12:21

Sure.

Jeremy Robb: 12:22

Food prices or anything that has to be moved. And the conflict where it is, even if they ended it today, it's likely to create some issues for a good period of time Sure. Before everything gets back to normal. And I think that's what, obviously, the Fed's worried about, and they they made a nod to. We got everybody except for one, Fed governor, on the same page in terms of their votes.

Jeremy Robb: 12:44

They they voted for no change. K. So Waller, last time, had voted for, you know, seeing lower cuts, and and we heard him a

Erin Keating: 12:50

few

Jeremy Robb: 12:51

weeks ago. But he went back to no cuts Right. Today. And, you know, and then people are expecting that the next move for the Fed in the near term could potentially be a hike in interest rates. Right.

Jeremy Robb: 13:03

Which the I don't think the market would wanna see at all. Sure. And, you know, the the bond market has moved higher in terms of yields from it ever since the March. And if anything, some of the heightened things that have happened over the past couple of days are going to push that further. And even though in the Fed's, like, dot plot expectations, they still kinda cited there would be one cut this year.

Jeremy Robb: 13:25

Yep. But if you look at the betting markets now in terms of the Fed funds futures contract, it doesn't see a rate cut until September 2027. So It's bananas. Yeah. The before maybe this past week, it was pushed out to December 2026.

Erin Keating: 13:42

I saw that.

Jeremy Robb: 13:43

So that would be your one cut. But I looked just this morning just to be sure, and obviously, we're living through a lot of day to day, like Right. The escalation level and things like that pushes it out further. But September 2027, that's a long long time.

Erin Keating: 13:55

That is a long time, especially considering we have midterms between now and then. And so we know that that can always change a lot Yeah. About how the government is gonna be reacting over the next few months. One thing that I just wanted to bring up, it might be a little bit of a surprise question, but I realized we haven't talked about it since our last time. GDP was actually restated and went down to half of what we thought it was in in q four.

Erin Keating: 14:18

Just curious, any thoughts on how that reshapes some of your thinking about macro conditions given everything that's going on right now?

Jeremy Robb: 14:24

Yeah. So what they the advanced reading of GDP was a 1.4% growth Right. In q four when it first came out. And they said they thought the government shut down and taken a point on

Erin Keating: 14:35

what that was.

Jeremy Robb: 14:36

And then when it was came out the second reading, it was cut in half to 0.7% growth for q four, impacted by a lot of things overall. And so, you know, that's kinda hindsight. We're trying to figure out where the economy's growing. There's so many factors that feed into measuring that. And then productivity also gets measured with a really long lag for some of that too.

Jeremy Robb: 14:57

I think as we think about what it means for moving into through 2026, you know, some of the things that we had seen was that the projections for growth in 2026 were pretty strong, but a lot of it was driven because q four was low. Right? So when you think about growth rates, the comparable is a lot of times the most important factor.

Erin Keating: 15:19

Right.

Jeremy Robb: 15:19

Doesn't always mean it's on the surface super strong growth. I do believe, if I'm remembering correctly, one of the reasons that the q four second read came down was they saw a little bit less investment. Mhmm. So AI investment clearly has driven a a lot of the spending overall. Consumption AI investment, two huge parts of of that consumption.

Jeremy Robb: 15:43

It's about 70% of GDP growth. And consumption, the way we track it too, showed that it had fallen a little bit in in December. So a lot of moving factors. You know, it could mean that we see better GDP growth in 2026. A lot of people talk about measuring the productivity of AI or measuring the ROI for AI.

Jeremy Robb: 16:04

Right. I stood in front of a bunch of people yesterday, and I said, I don't think anybody has a good way of measuring that yet, even though everybody wants one. The way people can measure it is by cutting expenses.

Erin Keating: 16:13

Right.

Jeremy Robb: 16:13

They they know how to do that. We know how to do that. You know, I do think the groups of people's workers, industries that use AI do see real productivity growth from it. It is a how do we measure it

Erin Keating: 16:24

Sure.

Jeremy Robb: 16:24

Issue. And so in the future, we may figure out a better way to measure some of that. Right. It may show that things are a little bit better than they are. But for right now, obviously, that lowers where we were.

Jeremy Robb: 16:34

It it lowers expectations for growth. It makes people worry more about stagflation because inflation didn't come down, and those aren't really great macro Sure. Economic leading indicators Right. At a time when we're worried about what's going on in The Middle East, putting pressure on inflation and trapping the Fed into not being able to lower interest rates.

Erin Keating: 16:55

Sure. And just to really quickly before I let you go, go back to The Middle East because it is, of course, what everyone's talking about right now. And we know that it's, hey. This is what affects consumer sentiment on the daily, but at the same time, we know that consumer sentiment has been fairly volatile on the daily because the headlines

Jeremy Robb: 17:12

Yeah.

Erin Keating: 17:13

Are moving around on a daily rate. And that there's also plenty of things that are very different about this time in this this place in time compared to previous times where we've seen gas prices go through the roof based on you know, we heard that China, as an example, already said, well, some people just start working from home, and we've had all these, you know, come to the office, you know Yeah. You know, requirements now and, like, might some people because of this say, you know what? You have choice. Stay home.

Erin Keating: 17:39

Don't spend your money on commutes. You know, the fact that we just have a lot of other alternatives. And then we do have EVs in the market that we do have more hybrids that we already knew were surging. Anything specific that you're looking out for over the next few weeks because we don't know how long this will go to sort of signal what's different about this time versus what are we gonna keep looking for based on what we know of history repeating itself?

Jeremy Robb: 18:01

Yeah. I don't know. I mean, those are good points for sure. The the dependence of the economy on consumers, you know, is still strong, but it's not the same as it was Right. For a lot of the reasons that you said, and then cars are more fuel efficient too and that kind of thing.

Jeremy Robb: 18:16

We have alternative fuel sources, and workers in the economy can adapt a lot. People that go to work every day that can work from home

Erin Keating: 18:24

Right.

Jeremy Robb: 18:25

Maybe they would. But as we learned back in the pandemic, there's a huge population of people that have to go somewhere Right. To do stuff and move things, and things can't be moved via a computer physical assets Sure. Whether that's groceries or whatever, highly dependent upon that. So I I think the long and short of it is there's still a really large impact, and there's a worldwide impact when a lot of different moving parts are going around.

Jeremy Robb: 18:52

And that the I think more and more people, if this lingers on for another month or so, I think it's gonna have a a worse impact on us on consumer psyche and their behavioral patterns. Right. And then businesses will probably try to adapt to do different things to adjust to some of that, but oil still matters a lot for the world. Yeah.

Erin Keating: 19:11

I agree. I I I thought about this from a consumer sentiment perspective, and you're right. It's it's one thing when it's just a an attack or, okay, we went ahead and bombed a specific location to take out specific, you know, weaponry and things like this. But once your baby boys and girls get called out

Jeremy Robb: 19:27

That's different.

Erin Keating: 19:27

To the sea and deployments start happening, that can that can really change things very differently, not to say that oil isn't a huge part of how we look at the economy period. So right now, we're sort of in the phase of how much is this going to impact us through the impacts of oil. Mhmm. The long and this drags on it to your point, consumer psyche might get real affected about what is this starting to say as far as lives and military movements and things like that. So lots to consider.

Erin Keating: 19:51

Heavy heavy time, right, as you were saying, right, as we were getting into this fun spring bounce where everyone was really looking forward to, you know, big fat wallets with good refunds. And so

Jeremy Robb: 19:59

We were seeing it. All the data was pointing to positive signs. So Sure. And and, honestly, it still is pointing to

Erin Keating: 20:06

positive signs.

Jeremy Robb: 20:07

But, you know, we may wake up next week and see that, oh, yeah. People are starting to pull back.

Erin Keating: 20:13

Do you see us coming back with a range for a SAAR like we did last year? We started out with sixteen three. We went to proposing a range.

Jeremy Robb: 20:19

I think the world we live in with the headlines makes everybody have rages Yeah. Anymore. That's like having one estimate is, I don't think, a safe way to be.

Erin Keating: 20:28

Sure. Exactly. Well, thanks so much, Jeremy. Always great to hear your insights on what you're seeing at the macro level, and we look forward to coming back here in two weeks. And who knows?

Erin Keating: 20:37

You know, maybe we're gonna be saying this is in the rearview mirror.

Jeremy Robb: 20:39

In this world.

Erin Keating: 20:40

And it is a lifetime. And I mean, even just a a day later, could have a whole different story. So always appreciate your insights. Thanks for being with us today.

Jeremy Robb: 20:46

Yeah. Thanks for being here.

Erin Keating: 20:48

Always great to have Jeremy here to talk to us about the macroeconomic conditions and how they might be playing out in the auto market, specifically what we're seeing as of right now. So we talked about the Middle East conflict. We talked about the spring bounce that we typically expect with tax refunds, etcetera. And as you heard, we are a little bit all over the place because things are in volatility state right now and no fed fund rate cut. So couple of things that I just wanted to connect with you all on is a conference that I attended and spoke at this week, the Bank of America Auto Summit.

Erin Keating: 21:19

So this is an annual event that Bank of America puts on, and a lot of the other investment banks do the same thing. They have a lot of their investors who are interested to know what's going on with different players in the automotive market. In December, they typically focus specifically on dealers, and then in March, they typically focus on the industry as a whole. So I get the opportunity to sit in a room with the investor relations and CFOs and heads of operations for multiple companies. They include Ford, General Motors, but also a lot of the public dealership groups, Asbury, Group one, Sonic, etcetera.

Erin Keating: 21:53

And those are some of the very names that I got to hear from this week as well as I spoke to the audience about affordability, and then our deputy chief economist, Mark Strand, spoke to the audience about really what we're seeing in that Middle East conflict and the overall health of the economy. So a couple of things that I wanted to just relate back to the conversation we were just having with Jeremy. Couple things that were reiterated by most of the manufacturers and the dealership groups is that the spring bounce looks like it's off to an okay start, but they're not quite feeling that refund traffic as heavy as they would have anticipated. And, of course, now we know refunds are a little bit lagged behind from previous years even if people are receiving more money, and that consumer sentiment is certainly volatile because of what's going on with The Middle East. But they were all still feeling very good that sales would pick up.

Erin Keating: 22:38

Weather was a big component they all felt as to why January and February were a little bit slower than typical, but, again, seasonally normal for everyone. One of the conversations really did center around used EVs and how everyone is anticipating that that will be helpful for those that are affordability constrained because they are offering a really good used vehicle that is well priced. And certainly in a time of uncertainty around gas prices could be really compelling to consumers to purchase. Another thing that was really on the minds now that the year has been clear of the tariff discussions from 2025 was how did that hit them? What happened?

Erin Keating: 23:17

And almost every dealer said that the manufacturers really managed it in different ways. And what it did for me was confirmed how we looked at it and what we saw from a Cox Automotive perspective. And that was that the automakers were, for the most part, taking the brunt of the pain. However, they were most certainly pushing the price to consumers through destination and handling fees. This was a big topic of discussion about how big some of those destination and handling fees were over the course of 2025 and even pushing into 2020 especially some brands that got up to over $2,000 for destination handling fees.

Erin Keating: 23:51

So this was done quietly as we know. A lot of people in the automotive industry did not wanna upset the administration. The administration was clear. They did not wanna see these tariffs handed on to customers. And so, in fact, it was done a little bit more quietly through the destination and handling fees.

Erin Keating: 24:08

One interesting fact is that the destination and handling fees do show up on Monrony labels. Those are the labels that you see on vehicles on dealership lots. That is law. They are required to be there. That was law that came into place decades ago by a different agency.

Erin Keating: 24:22

Now in the digital world, when most people are actually shopping for vehicles online, there is no Monrony label, and therefore, there is no requirement for destination and handling fees to be upfront and personal for the consumers when they're shopping for cars. So something that's really come into play that a lot of the dealers were speaking about was, hey. How can we tackle this discrepancy between consumers seeing it if they're on the dealer lot, but not seeing it when they're actually looking and shopping for cars online because they're getting surprised, the consumers are, when they're finally going through negotiation and seeing that much larger chunk of change being dedicated towards destination and handling fees. And, of course, those are pass throughs directly to the manufacturers. Those do not go through the dealers.

Erin Keating: 25:02

So that was noted as a point of contention for them having to be the messengers of that bad news for customers while also not really being able to take that into consideration when they're looking at their profitability. That said, they also felt that their invoices were rising and that they did see MSRP's rising. But as we know from our data, we didn't see average transaction price go through the roof and only recently saw one of the larger year over year changes at 3.4% in our February average transaction price. So for sure, the dealers are feeling this pinch of consumers saying cars are getting more expensive. We are losing more vehicles that are less expensive to those affordable clients as or price sensitive clients, and they are seeing exactly what we expected is that a lot of the new vehicle buyers who typically might have been able in the to get into the market for the 20 to $25,000 range are in fact moving down into used vehicles and or holding on to their vehicles longer.

Erin Keating: 25:56

Another big topic of conversation while we were there was fixed operations. Every dealer is on the hook for figuring out how do they maximize the efficiency through their service lanes to be sure that they are really just pumping up that profitability engine for their business. Most of them feel like they're making some headway on technicians. This has been a consistent problem in the industry as a lack of automotive technicians. A lot of them have some really innovative programs to recruit more and more people from high school going into the business, they've also experimented a lot with different pay programs, so flat pay versus hourly pay.

Erin Keating: 26:30

And most of them felt that flat pay has actually increased their efficiency. The challenge, of course, is that there's a lot of recall work out there that is taking up a lot of time in the service space. So that is not allowing for as much time potentially for customer pay, which we know is more profitable for dealers. And so there's some, you know, a little bit of tug and pull with the manufacturers to try to figure out how do they manage the recall work and the warranty work versus what might be customer pay work. And as we knew from our service study, there's also a challenge of battling it out with the independent shops for any kind of repair and collision work that needs to be done.

Erin Keating: 27:02

On that topic, though, for the newer vehicles, it was discussed around calibration tools and really master technicians and master certifications to be able to deal with the complexity of the cars that we're seeing in the market these days. So that was an upside for dealers feeling that they were better suited through the OEMs to have the technicians and the equipment and the tooling to manage that. But the point of contention is making sure that the customers actually know that that's where they need to begin with these highly complex and technologically advanced vehicles. The last thing that, of course, came up across the intersection of all the different clients that were there is USMCA. We do know that tariffs are continually a big topic for the industry.

Erin Keating: 27:39

As we've discussed here before, the IEEPA tariffs going away didn't necessarily impact the automotive sector specifically. The section two thirty two tariffs are what is at play here in the automotive industry. Those have not changed, and the USMCA is merely a negotiation between the three nations that make up North America, Mexico, Canada, and The US on how they might look at their rules of origin, etcetera, moving forward. So the instinct for most people to say is that they need the USMCA to be negotiated and to be at least stabilized. They do anticipate that that will happen, but it may very well happen through bilateral agreements as opposed to one big moving parts of USMCA across the finish line.

Erin Keating: 28:22

Just keep in mind, the section two thirty two tariffs on autos is separate from USMCA. So maybe it is a negotiation tactic to go ahead and bring those tariffs for US and or for Canada and Mexico down from the 25% right now. But outside of that, the tariffs will not adjust necessarily just because USMCA is negotiated. What USMCA might be able to do is to either loosen or tighten the rules of origin, and that will determine what is considered USMCA compliant. That's a lot of gobbledygook that we will keep you updated on, but we are closely watching this as are our dealer partners, as are the automakers in the industry, and is just one more of the complications that we talked about with Jeremy this morning that we will continue to monitor because this year, no doubt, will continue to be a topsy-turvy year for all of us, and we are here with you every two weeks at the Auto Market Brief to keep you updated on all of the changes and what that might mean for your business or for you as a consumer or for the industry at large.

Erin Keating: 29:26

So thank you again for joining us for Auto Market Brief. We look forward to seeing you next time. Thanks for joining us on this episode of The Auto Market Brief. To stay up to date with all the latest news and perspectives from our team of experts, be sure to visit our insights hub at coxautoinc.com.