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The Key Takeaways
- Cox and Cars.com reported that new car prices are down slightly and the dealers offer generous incentives.
- Cars.com reported that those consumers who are looking for vehicles under $30,000 will have more options.
- Cox stated that used car prices will not fall as dealers won’t be able to bring in enough of them before 2026.
Car shoppers could be in for a smoother ride in 2025—especially if they're eying new vehicles.
According to Cox Automotive – a software company serving the automotive industry – market trends are shifting to favor drivers. This momentum will continue into next year.
Cox, a senior economist focused on the new-vehicle market, said that dealers are now offering greater incentives to customers, as they are more easily able to access loans and credit. He made this statement during a presentation of a future outlook for 2012. Charlie Chesbrough is a senior economist who focuses on the new vehicle market. He said that recent increases in car prices are tapering off due to the increase of supply.
“The seller strength has eroded,” Chesbrough said. “Affordability is improving in the marketplace and trend lines suggest it may have further to go in 2025.” Cox, however, said that the prices of used cars are not likely to continue to decline due to a tighter inventory.
According to the Bureau of Labor Statistics Consumer Price Index Report, both indexes of new and used car prices decreased year-overyear in October, but rose from their levels of October. The retail sales for November were above expectation because Americans bought enough cars.
Four trends are expected to dominate the auto market by 2025.
The price of new cars is levelling off.
According to Cox, the number of vehicles on sale in America has increased for almost three years. This, he says, is a factor that’s easing up price increases.
Prices continue to fall. According to Cars.com, a digital marketplace of cars, the average price for a new car is $49,000, down from $51,300 in 2023. Dealers have offered more and more incentives—such cash rebates and low-cost financing—over the past two-plus years, according to Cox data.
Cox says that incentives were 8% on average of each transaction in November. They will drop to around 2% by 2022. They were close to 10% prior to the pandemic.
Compact models will soon be available.
Chesbrough reported that drivers are leaving their lot with smaller versions of the cars they had hoped to buy, as they try to stick to their budgets.
Cox reported that compact vehicle sales have increased. Cox reported that the growth was in compact cars and SUVs. They sold at an average price of $33.570 per vehicle in 2024.
In 2025, shoppers looking for a cheaper price will have more options. Cars.com reports that in November, the number of new cars available at less than $30k grew by 42% over a previous year.
Prices of used vehicles are not likely to drop due to the shortage.
Cox says that used car dealers will not be able to lower prices now because they are more difficult to obtain.
Jeremy Robb said, Senior Director of Economic and Industry Insights at Cox, that dealerships can get a substantial share of their inventory when they buy cars with expired leases. The volume of leased cars plunged in 2021 and 2022 when overall car production was down because of pandemic-related disruptions, and the number of cars exiting a lease and available for sale is not expected to normalize until at least April of 2026, Robb said.
Since September, the prices of used vehicles have increased almost weekly.
Electric vehicles have a bright future.
Electric vehicle prices are up 1.4% year-over-year, but dealers have general offered bigger incentives on these cars for several months now and the discounts aren't expected to disappear, Cox said. According to the company, average incentives now amount to almost 15% of average prices.
“Incentives and discounts have played a major role in lowering EV prices and will continue to do so,” Stephanie Valdez Streaty is the director of Industry Insights at Cox.
Valdez Streaty, a Valdez Streaty spokesperson, said that the cost of EVs could come down because it is expected that batteries will be less costly to produce.
Cox economists believe that electric cars may do better than many expect if Donald Trump follows through on his promises to cut incentives for them. Cox economists say that policy changes will not be implemented until 2025. States may also continue to offer incentives to EV buyers.
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