2025 Trends: Car Prices Remain Stubbornly High in New Year and Potential Tariffs Could Add Pressure, But Shoppers May Find Silver Lining in New Affordable Inventory, According to Cars.com
New year brings tightening used-car supply, a shifting definition of "American-made," and new strategies for electric cars
CHICAGO, Dec. 17, 2024 /PRNewswire/ -- Cars.com Inc. (NYSE:CARS) (d/b/a "Cars Commerce Inc."), an audience-driven technology company powering automotive, today released its 2025 Automotive Trends. The industry is entering the new year with a mix of optimism and challenges as shifts in supply and demand continue to shape automotive retail.
"Affordability is improving, but we're not out of the woods. Two interest rate cuts in late 2024 eased borrowing pressures but the average new car price remains stubbornly high," says David Greene, Cars.com analyst. "Further complicating matters, many consumers are struggling financially. Loan delinquencies are high, while used vehicle values have fallen from record highs in the past two years, making it more difficult for consumers to sell or trade out vehicles. While inflation is cooling, sticker shock and affordability in the auto market remain key challenges for 2025. The good news is that new car inventory priced under $30,000 is increasing, offering some relief for buyers and a bright spot for the year ahead."
2025 Brings Challenges for Used Car Shoppers, Forcing a Potential Shift Towards New Cars
The average new-vehicle price has leveled off at $49,000, slightly below its June 2023 peak of $50,300, a small but encouraging shift since prices began accelerating in spring 2021 from a $37,000 average.1 A positive shift for 2025 is that the inventory of new vehicles priced under $30,000 increased by 42% year over year in November, delivering some comfort for budget-conscious buyers.1 Cars.com's new enhanced experience aims to help new-car shoppers easily compare vehicles and buying options to find the best vehicle for their budget.
"In 2025, more car shoppers may turn to new cars as the better option. The late-model used inventory just isn't there, due to fewer sales and leases in the past three years. As a result, the options available will continue to command inflated prices," adds Greene. "For new car shoppers, it will be beneficial as they may get more for their trade-in, which also helps offset the price of a new car."
'American-Made' Is Redefined
The definition of "American-made" is evolving, largely due to the Inflation Reduction Act. Foreign automakers with U.S.-based manufacturing facilities now rival legacy Detroit brands, particularly in states like Alabama, Tennessee and Texas. The potential implementation of tariffs in 2025 could further complicate how "American-made" is defined and achieved in the auto industry. These tariffs are expected to impact vehicle components, potentially raising the cost of manufacturing new cars. Fully assembled imported vehicles, already among the most expensive goods affected by such tariffs, could face even higher costs. Notably, potential tariffs on Mexico and Canada may conflict with the terms of the United States-Mexico-Canada Agreement, thereby adding uncertainty.
The impact of the American-made definition in the electric-vehicle market is similar to the mainstream car market as domestic EV battery production is reshaping the landscape and boosting the presence of hybrids and EVs on Cars.com's American-Made Index.
Tricky Balance Between EV Supply and Consumer Demand Lingers
The EV market continues calibrating to consumer demand, driven by growing inventories and declining used-EV prices. In 2024, used-EV prices dropped more than twice as fast as the broader used-car market, making them more accessible to a wider range of consumers. On the new-car front, EV inventories increased by 35% year over year, although price sensitivity remains a challenge — new EVs are priced $13,000 above the average new car.1 An overproduction of EVs has left dealer lots with extra inventory to unload, causing automakers like Ford and GM to slow production to find the right mix for shoppers. Hybrids are growing in popularity for those interested in the comfort of a gas-powered vehicle and the savings of an EV.
For more of the latest automotive news, reviews and car-buying advice and tips, visit Cars.com/News.
1 Cars.com internal data
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Cars.com is the No. 1 most recognized automotive marketplace visited by nearly 30 million in-market consumers each month. Launched in 1998 and headquartered in Chicago, Cars.com empowers shoppers with the data, resources and digital tools needed to make informed buying decisions and seamlessly connect with automotive retailers. Cars.com is the flagship offering from Cars.com Inc. d/b/a Cars Commerce Inc., an audience-driven technology company empowering automotive that simplifies everything about buying and selling cars. Learn more at www.carscommerce.inc.
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SOURCE Cars.com Inc.