With a new year upon us, it's time for a look at what's ahead for the auto industry in 2025, courtesy of Cars.com's 2025 Automotive Trend report. Trends include stubbornly high new car prices, despite improving affordability, and the impact of potential tariffs. Other trends cited in the study: a tightening used-car supply, a shifting definition of “American-made,” and new strategies for electric cars.
Overall, Cars.com says the industry is kicking off the new year with a mix of optimism and challenges, and says 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.”
Key Takeaways:
A potential shift towards new cars in 2025: Average new vehicle prices are leveling off at $49,000, down from a June 2023 peak of $50,300, a small, but encouraging shift since prices began accelerating in spring 2021 from a $37,000 average. Cars.com says 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.
“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 : Cars.com expects the term “American-made” to be redefined in the coming year, largely due to the Inflation Reduction Act. It says foreign automakers with U.S.-based manufacturing facilities now rival legacy Detroit brands, particularly in states like Alabama, Tennessee, and Texas. Researchers say 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.
Cars.com also points out that domestic EV battery production is reshaping the landscape and boosting the presence of hybrids and EVs on Cars.com’s American-Made Index.
A Continued Trickiy Road for EV Supply vs Consumer Demand: The EV landscape will continue to be a tricky one in 2025 as the market calibrates to consumer demand. The market is driven by both growing new-car EV inventories and declining used-EV prices. In 2024, used-EV prices dropped more than twice as fast as the broader used-car market, which made them more affordable and therefore more accessible to a wider range of consumers. New EVs are expected to remain pricier than the average new car - priced $13,000 above the average new car. With new EV inventories up 35% year over year, Cars.com says 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. The popularity of hybrids that we've seen in 2024 is expected to continue as a trend in 2025 as well.
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