It’s a good time to take stock of what new and used car buyers can expect this coming year. Lower interest rates may provide relief, and the new presidential administration could clamp down on electric vehicle tax credits.
Given what we know and what we don’t, I asked Erin Keating, executive analyst and senior director of economics and industry insights for Cox Automotive, to weigh in with her 2025 car buying outlook.
Here’s what Keating said:
Q: What can new car buyers expect in 2025?
A: New car buyers can expect to see rates potentially drop and more hybrid models come to the market. Prices will likely remain stagnant due to the cost of building and importing cars, as well as automakers anticipating potential tariffs and electric vehicle tax credits to drop away. While some automakers are pulling back on electric vehicle production, more models are anticipated in 2025, which will create a lot of customer choice.
Credit: SPECIAL
Credit: SPECIAL
We have seen incentives from automakers and dealers rising, and anticipate they will remain elevated if inventory continues to build. We see sales are at a good clip to close out 2024 but will slow as usual in the early part of the year.
Memorial Day weekend, typically a big sales weekend and kickoff to summer deals, could prove to be big for customers depending on what happens with electric vehicle tax credits and sales.
Q: What can buyers of used cars expect in 2025?
A: Used cars will continue to get older as we anticipate the availability of newer models to shrink due to the lack of production during the pandemic. We could see more automakers adding older models to their certified pre-owned programs which could provide customers with more assurances on quality for older, more affordable models.
Credit: Cox Automotive
Credit: Cox Automotive
More used electric vehicles will also make it to the market, which could offer more options to those looking for newer models and more affordable price tags.
Q: Are there specific types or price ranges of vehicles that will be in short supply? Are there particular vehicles that will be in plentiful supply?
A: Due to the affordability challenges, we will continue to see subcompact and compact SUVs sell better than their larger counterparts. Also, those manufacturers still making sedans could see the smaller vehicles selling faster.
Credit: SPECIAL
Credit: SPECIAL
The U.S. is still a “big car” nation and with rebounding consumer sentiment, sales of pickup trucks and larger SUVs will likely grow marginally. Hybrids have also become more popular and automakers like Toyota and Honda, who make hybrids throughout their model lineup, will be in high demand.
Q: Will electric vehicle prices dip as manufacturers try to sell off cars that the new administration may no longer back? What will happen there?
A: Electric vehicles are most at risk moving into 2025. Threatened infrastructure spending and the likelihood of the “leasing loophole” disappearing quickly will dampen demand. While the $7,500 tax credit for new electric vehicles has mostly helped leased vehicles, retail purchases will also see a slowdown if they are fully eradicated. Batteries have improved, and range has continued to get better and better on new electric vehicles, yet the ability to charge has now become a struggle.
Credit: Courtesy Hyundai Motor Group
Credit: Courtesy Hyundai Motor Group
Consumers can feel assured that modern electric vehicles have enough range for a typical American commute and daily driving habits, yet they continue to worry about the one to two long trips they may take and require on-the-go charging. As spending from the federal government is at risk, this could further create anxieties for buyers. That said, home charging is still a viable option for a lot of Americans, and more charging infrastructure that has already been in place to happen will show up, along with more awareness.
Q: As most buyers need to sell or trade in vehicles, what can those buyers expect in 2025?
A: Newer (used) models will still command decent returns given the dearth of vehicles in the 1 - to 3-year-old class, and as those dry up, older vehicles will likely also start to get a second look. Depending on how aggressive automakers get with new vehicle pricing, we could see used vehicle pricing stabilize.
Renee DeGross Valdes is a veteran reporter and editor who writes about car advice for Kelley Blue Book and Autotrader. She previously worked for CNN and The Atlanta Journal-Constitution.
The Steering Column is a weekly consumer auto column from Cox Automotive. Cox Automotive and The Atlanta Journal-Constitution are owned by parent company, Atlanta-based Cox Enterprises.
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