Up to date February 28
From December 2024 to January 2025, the common transaction value of recent autos fell 2.2% to $48,641, in response to analytics firm Cox Automotive and Kelley Blue E-book.
Analysis firm J.D. Energy additionally forecast a January decline in new automobile costs to a median of $44,636, which is a lower of $238 in comparison with the earlier yr.
However new automobile costs could not proceed trending downward, if tariffs introduced by the Trump administration are absolutely carried out. On February 27, President Trump mentioned in a Fact Social submit that beforehand introduced 25% tariffs on imports from Mexico and Canada will start on March 4. He added that an already carried out 10% tariff on imports from China, which incorporates components to make vehicles, will double that day.
On February 19, Trump introduced tariffs “within the neighborhood of 25%” can be imposed on auto imports and semiconductor chips (utilized in practically all fashionable vehicles) as quickly as April 2[0]. Whereas particulars are nonetheless scarce, automakers are more likely to move at the least some portion of tariff prices to shoppers.
Why are vehicles so costly now?
New automobile costs are excessive for 3 causes:
Excessive shopper demand following the Covid-19 pandemic has enabled automobile producers and sellers to maintain costs excessive.
Ongoing inflation has elevated manufacturing and labor prices, which automobile producers and sellers have handed on to automobile consumers.
Many new vehicles include superior expertise, bigger infotainment screens, driver-assistance methods, and hybrid/EV powertrains — all including to the associated fee.
On the top of the pandemic, provide chain disruptions and semiconductor chip shortages have been liable for slowing, and even halting, car manufacturing. As automobile stock decreased, new and used automobile costs skyrocketed and stay elevated right now.
New automobile costs climbed 22% since 2019
Based on the patron value index (CPI), which is a Bureau of Labor Statistics (BLS) measurement of inflation and costs paid by shoppers, new car costs have elevated 22% since 2019[0]. Though costs did lower barely in 2024, they ticked again up on the finish of the yr and remained unchanged by January 2025, in response to the CPI report launched Feb. 12.
Common new automobile costs are nonetheless roughly $11,000 greater than they have been earlier than COVID-19 hit. They’re hovering close to 2022’s all-time highs, which J.D. Energy locations at $47,329 and Cox Automotive units at $49,926.
Do you know…
A tariff is a tax imposed by the federal government of a rustic on items imported from one other nation. A authorities may use tariffs to control commerce, shield home pursuits or increase income. The purchaser of the products (akin to a carmaker shopping for components) pays the tariff and should select to move that price on to shoppers.
Will automobile costs proceed to go up underneath Trump?
On high of the beforehand talked about tariffs, 25% tariffs on metal and aluminum imports are anticipated to start on March 12, each merchandise central to the manufacturing of autos. With the announcement of so many tariffs, a lot uncertainty stays about how they’ll collectively have an effect on automobile costs.
The Canada and Mexico tariffs will disrupt North American free commerce and additional have an effect on automobile costs if these nations impose reciprocal tariffs, in response to Cox Automotive[0]. The complete impact tariffs can have on automobile costs stays to be seen, however S&P World Mobility estimates a 25% tariff on a $25,000 automobile from Mexico or Canada may enhance its value by as much as $6,250, with importers more likely to move most or all of this enhance alongside to shoppers[0].
Elimination of the EV tax credit score can also trigger costs of sure electrical autos and plug-in hybrids to rise. Members of the Senate not too long ago launched laws to finish the EV tax credit score (at present as much as $7,500 for brand spanking new autos and as much as $4,000 for used) and so as to add a $1,000 tax per EV for highway repairs[0], [0].
What about auto financing charges and funds?
On high of paying excessive automobile costs, automobile consumers who finance are more likely to proceed paying elevated rates of interest and funds. Common auto mortgage rates of interest elevated to their highest stage in years in the course of the pandemic, and so they’ve barely budged down. Based on J.D. Energy, the common new automobile fee was on tempo to be $734 in January[0].
Though presidents don’t management rates of interest, their insurance policies could affect them. When costs general start to rise, the Federal Reserve often will increase the federal funds charge to sluggish financial exercise and cut back inflation. When the federal funds charge adjustments, auto mortgage charges usually observe. The next chart reveals motion of the federal funds charge since 2021.
Are used automobile costs dropping?
Sure. Based on Cox Automotive, in January 2025 the common used-vehicle itemizing value was $25,128 — a lower of roughly $650 from the earlier month[0].
Used car costs have steadily decreased all through 2024; nonetheless, used automobile stock has been tight resulting from fewer off-lease autos being returned and homeowners holding their vehicles longer.
If new automobile costs enhance, we may see a repeat of automobile consumers turning to used vehicles as they did in the course of the pandemic. The consequence then was additional tightening of low stock, which drove used automobile costs greater — in some instances, greater than new automobile costs.
Automobile possession price presents an extra problem
The upfront value of vehicles hasn’t been the one monetary ache level for shoppers, as proven by the NerdWallet Automobile Possession Prices Index, which is a measurement of inflation and spending figures from the BLS.
Automobile possession prices grew at a double-digit annual charge each month from April 2021 to November 2022, in response to NerdWallet’s possession index. That development has slowed general, however the newest knowledge reveals possession inflation was 7% in January. Since January 2020, the prices — together with fuel, repairs and upkeep, parking, insurance coverage and licensing prices — have risen 41%.
Is now an excellent time to purchase a automobile?
For those who anticipate wanting or needing a brand new automobile within the subsequent few years and may afford to purchase now, it might be a good suggestion to take action. Though automobile costs, auto mortgage rates of interest and possession prices are greater now than they have been 5 years in the past, they could climb even greater. Shopping for whereas stock is plentiful may prevent cash.
“Decrease auto mortgage charges now look much less seemingly sooner or later, so including tariff threat factors to an surroundings the place it’s higher to purchase sooner relatively than later, all else being equal,” in response to Cox Automotive Chief Economist Jonathan Smoke.
To scale back automobile prices as a lot as doable earlier than shopping for, observe a number of easy steps.
Test on-line pricing guides akin to Kelley Blue E-book, Edmunds or NADA guides to know what value you must pay.
Use an auto mortgage calculator to find out the perfect state of affairs — mortgage quantity, rate of interest, time period and down fee — for a month-to-month fee that matches your finances.
