Bumpy Road Ahead for Car Shoppers in 2025

• The party is over for used car shoppers: While prices had dropped by 11% in 2024, they are likely to trend back upward in 2025
• With the federal EV tax credit in jeopardy, consumers have rushed to buy EVs in the wake of the election, driving down new inventory by 20% in less than a month 
• Incentives will continue to ramp up as new car prices remains stubbornly high

Chicago, IL – December 9, 2024 – After a year in which car shoppers saw at least mild relief – with used car prices coming down noticeably and generous incentives available on higher-inventoried new cars like EVs – 2025 will be a more difficult year for car shoppers, according to the latest data and analysis from AI car shopping app CoPilot. With far fewer affordable new cars on the market, and both used car and EV prices set to rise again, consumers will continue to grapple with the ongoing ripple effects of the car market’s pandemic-era challenges, even five years after the start of COVID.

In 2024, lightly and moderately used cars, which soared in price during the pandemic, finally came down in price significantly for the first time. For instance, 1-3 year old car prices fell by 6% year-over-year to an average of $36,884, while 4-7 year old car prices fell by 17% to an average of $24,080. Additionally, used car supply has been falling steadily steadily this year as consumers took advantage of long-awaited price drops: 1-3 year old cars have a market days supply of 45 (down by 13% in 2024), while 4-7 year old cars have a market days supply of 41 (down by 7%).

Next year, supply will only continue to diminish, as fewer off-lease cars will return to dealer lots starting this year and continuing for the next few years (representing an ongoing impact of new car inventory shortages during the pandemic and fewer new cars being sold in those years). As a result, diminished used car supply will push prices back up in 2025 and possibly beyond.

“The COVID-19 pandemic shook the car market to its core and has resulted in a new, far more expensive reality for consumers,” said CoPilot CEO and Founder Pat Ryan. “Unfortunately, things probably won’t get any easier for consumers in 2025. Despite this year’s price drops, used car prices are still incredibly inflated in the long term, up 36% overall from their pre-COVID levels. This is the backdrop against which prices will continue to rise, and create an even more difficult environment for many consumers who have struggled to afford a new car for the past several years.”

EVs Face Yet Another Roadblock

In recent years, EVs have struggled to gain market share among mainstream consumers who have been reluctant to commit to the high price tag and logistical challenges like charging. While EV prices have remained stubbornly high (averaging $64,873 for new EVs, and $38,489 for used EVs) – placing them well above the cost for a gas-powered car – purchasing an EV has become more feasible for many consumers with the addition of the Biden administration’s $7,500 federal tax credit. However, with the Trump administration vowing to do away with the credit, it’s likely sales will take a hit, with projections estimating EV sales could drop by as much as 27%.

Likely anticipating the end of the tax credit, consumers have flocked to the EV market in recent weeks. In the past month alone since the election, new EV inventory has fallen by 20% to 80 market days supply. Now, new EV supply is only 8% higher than that of gas-powered cars (74 market days supply). By comparison, at the same time last year, the gap between inventories of new EVs and new gas-powered cars was much larger (58%, with 104 market days supply for new EVs and 66 market days supply for new gas-powered cars).

With the EV market set to face new headwinds, new hybrid vehicles – currently at an average price of $55,180, and down by 5% over the past year – may represent a more favorable option for consumers in the medium term. 

Automakers Will Continue to Lean on Incentives

New car prices remain stubbornly high, averaging $49,624 and down only 1% in 2024. Additionally, there are far fewer affordable vehicles in the market than there were pre-COVID: In 2020, 38% of new cars were listed under $30,000. That figure has fallen to just under 10% as of this year.

During the pandemic, automakers made the strategic decision to prioritize profit margins over volume, focusing on producing more profitable cars like SUVs, over more affordable but lower-profit margin cars like sedans. While this strategy paid off in the short term – resulting in record revenues for many automakers during the pandemic – over time it alienated consumers who were priced out of the market, lowering new car sales (and thus increasing new car inventory on dealer lots by 7% this year). Automakers are struggling to connect with consumers in this new inflationary environment, with one prominent example being the sudden recent resignation of Stellantis CEO Carlos Tavares as the company’s sales and share prices tumble.

However, one piece of relief from automakers in 2024 came in the form of incentives. Currently, in December, some of the most generous incentives focus on luxury cars (like the Lincoln Navigator, currently with offers of 0% financing for 60 months and $10,000 cash back) and pickup trucks (like the Ford F-150, currently with a $4,000 cash back offer). In 2025, it’s likely automakers will continue to pull on this lever, rather than lower price outright. CoPilot predicts that incentives will continue to increase especially among vehicles like EVs that will be more difficult to move in the year ahead.

About CoPilot

For journalists and publishers, CoPilot’s data has the best real-time view on prices, sales, and inventory in the new and used car market. By monitoring the online inventory of virtually every dealer in the country, every day, CoPilot:

• Provides fresh, comprehensive, and daily data
• Offers insight on the new and used market, broken down by segment, brand, model, and fuel type
• Looks at current retail prices, which (unlike wholesale prices) are a much more accurate reflection of how much consumers are currently paying for cars

For consumers, CoPilot offers the first-ever AI-assisted car shopping app, which:

• Searches virtually every dealer and analyzes millions of vehicles to find the best car for your needs, at the right price
• Helps you avoid add-ons and hidden fees, and negotiate the best price
• Does not take money from dealers, providing customers with truly unbiased recommendations

Media Contact:

Kerry Close Guaragno

kclose@groupgordon.com

732-609-2644