What Can Car Shoppers Expect Early in 2025?

As 2025 kicks into gear, what can car-shopping consumers expect when looking to purchase and finance a new vehicle?

While many people overall are feeling better about their financial situation heading into the new year, nearly 9 in 10 Americans think inflation is still a big concern, and 44% think the Fed has done a bad job getting it under control, according to a recent survey by WalletHub.

As rising interest rates substantially impacted the automotive market, dealers reported fewer buyers and longer sales cycles in 2024. The high cost of financing kept many potential buyers on the sidelines, particularly as the cost of vehicles also rose. However, there is optimism that more consumers will be motivated to purchase vehicles in 2025.

Closing Out 2024

Looking back at the end of 2024, prices of both new and used cars rose in December 2024, according to Kelly Blue Book. They reported that the final sale price of the average new car in December hit $49,740, just $218 less than the all-time high average price in December of 2022. The average used car was listed for $25,565 in December — a 0.25% increase from the previous month but still 3.4% lower than a year prior.

Luxury car sales boomed in December. Sales of vehicles priced above $80,000 were up 37% over the same period a year ago.   

Although auto loan rates remained high through the end of 2024, leading auto industry publication, CBT News, has reported that auto loan interest rates are beginning to show signs of improvement early on in 2025, giving hope to consumers who struggled with high rates throughout 2024.  According to auto shopping expert Edmunds, the average new vehicle loan rate dropped to 6.6% in December 2024, down from a high of 7.6% in October 2023. Used-vehicle loan rates also declined in December, falling to 10.8% from 11.9% earlier in 2024. 

Impact of the Fed’s Rate Cut

The Federal Reserve’s interest rate cut in mid-December, while slightly less from earlier forecasts, has had a positive impact on auto loan interest rates. Over the past year, interest rates on both new and used vehicles were on the rise, but the recent cuts by the Fed suggest these rates could fall further as the year progresses. 

Some analysts believe that the expectation of a further Fed reduction in 2025 could encourage competitive auto loan rates in the months ahead.  A good sign for potential car buyers.

The next expected rate adjustment is slated for mid-2025, with experts predicting another half-point reduction. For car buyers, these adjustments could mean more affordable financing options ahead. Impacts on auto loan rates will come from other market factors as well, including used-vehicle values, lender competition, and economic conditions, in addition to the federal funds rate.

Finding an Affordable Car Now

That being said, if you’re shopping for an affordable car, it’s actually not hard to find a good deal right now. In December, the average buyer qualified for nearly $4,000 worth of incentives — an 8% discount off MSRP.  Incentives also grew by 44% in 2024, as some automakers found themselves overstocked and provided consumers with discounts to compete.

According to Kelly Blue Book, there are plenty of cars available at more affordable prices in January, and shoppers should find discounts on them at many dealerships. Automakers had an inventory glut through much of 2024. While brisk December sales helped some auto makers get their supply of cars down to more reasonable levels, some brands remain overstocked.  

For example, the average sale price fell in December for a number of auto brands due to overstock.  Dodge, Chrysler, Mitsubishi, Jeep and Buick all experienced notable drops in their average transaction prices compared to year-ago levels.

When shopping for your next car, be sure to consider things like your budget, the type of car you want, and how you'll pay for it. Your first step should be getting pre-approved for an auto loan. Securing a pre-approved auto loan before heading to the dealership will provide you with more leverage, lock in a competitive interest rate, and help you maintain control of your budget.

Nuvision has streamlined the pre-approval process to make it as hassle-free as possible. When you’re ready, simply complete a brief, no-obligation application, and you’ll be prepared to shop for your new car with confidence.

Car Buying Tips to Consider

There are some advantages to buying a car this time of year, if you do your homework. For used car shoppers, January and February can be a real buyer’s market.  After typically seeing new car sales increase during the holiday season, as we did in 2024, dealerships are facing a quieter market in early 2025. This post-holiday slowdown can give buyers more room to negotiate, especially as dealerships work to meet their first monthly sales goals of the new year.

The influx of trade-ins from this past December’s new car buyers means dealerships have more used cars to sell. With used car inventory levels rising in January, many dealers are motivated to move these vehicles off the lot quickly. Remember, securing a pre-approved auto loan before heading to the dealership will give you even more leverage at the dealership.

Something else to consider -- the surge of tax refund car buying season typically begins in March. January and February buyers can beat the rush, facing less competition and enjoying more room for negotiation.

Looking Ahead

Car shoppers in 2025 are unlikely to see prices that factor in any potential new tariffs, according to some industry experts. Baseline vehicle prices will be about the same, so auto dealers are likely to offer more incentives to pull in buyers. While the average car price is higher than pre-pandemic levels, the good news is car buying market is relatively stable. The average transaction price for new cars is expected to hover between $47,000 and $48,000 in 2025 according to Cox Automotive, down from an average price of $48,724 in November of 2024.

Overall, there is optimism for the auto market in 2025, as expectations for lower interest rates prevail, and inventory and deal opportunities for consumers grow.

When you’re ready to purchase your next car, Nuvision can help you take the right steps to help ensure you get the vehicle and financing that best fits your budget -- and provides a more financially secure car-buying experience.