Car Selling Predictions 2025

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More Car Incentives are Coming!

Car sales have been on a roller coaster ride for the past five years. This was due in part to the Covid pandemic and a lack of various build materials including the semiconductor computer chip shortage. But as we head into 2025 the car market is finally beginning to level out. 

Sales of new cars were pretty stagnant in 2024. Automakers and dealerships alike will have to work harder to get consumers behind the wheel of a new vehicle in 2025. Over the past five years we have seen new car prices rise by 27 percent and consumers have shied away from pulling the trigger on a new car. 
You can see the disparity between what the average buyer wants to spend and what manufacturers are hoping you'll spend. In fact, according to Edmunds, about half of new car shoppers in America figure to spend $35,000 or less on their next car but the average dealership transaction price last year was $47,870 for a new car. Partially because of this, in the second quarter of 2024 new car sales were only up by 0.1 percent over the previous year. 

Clearly the auto industry has to do something fast to get sales back on track, but they see lowering the manufacturer's suggested retail price or sticker price on a car to be a sign of defeat. They would much rather increase the incentives available to buyers. So,expect to see an increase in manufacturer incentives on cars in 2025. The percent of incentive spend is already at its highest since 2021.

Look for new car incentives and rebates from manufacturers and dealerships in the form of low APR interest rates on car financing, cash discounts off the sticker price, and even exclusive and attractive lease deals. These vary by where you live and change from month to month. Check current rates and incentives through the automaker, your local dealer, Kelley Blue Book, Edmunds, or bankrate.com.
Low APR Financing
One form of new car incentive is through low interest rates. These offer special deals on financing that can be as low as zero to five percent. The higher your credit score, the lower the rate is likely to be. The length of your loan is also a factor in getting the best incentives. Be aware that low APR financing is usually not combined with customer cash incentives.
Customer Cash
Customer cash incentives usually offer the best deals for new car shoppers. These deals are direct cash discounts off the price of the vehicle. You may have to meet certain strict requirements to get a cash rebate such as being a recent college graduate, a first responder, or an active member of the military. However, there are also such things as "Conquest Bonuses" for switching from one automaker to another or "Loyalty Bonuses" for staying with the same manufacturer. Often, these cash bonus incentives are only available by financing through the automaker.

Lease Specials

Another thing car manufacturers do to incentivize buyers is to offer special lease packages through in-house financing companies such as Ford Credit Financing or Toyota Credit. Generally, your credit scores must be 670 or higher. For instance, Ford Credit wants to see a score of 700 or higher and these leases are often based on an inflated residual value of the vehicle. That means the estimated value of the car at the end of lease may be unusually high.
Lease deals change monthly, so it is best to look for deals on the specific make and model of car that interests you. One of the biggest benefits of leasing is that it is usually cheaper month to month than financing a new vehicle, plus you don't have to worry about repair costs. On the negative side, you will have a monthly lease payment for as long as you lease a car, and you never own it. You also have to stay within mileage limits or you'll pay a penalty.

Falling Interest Rates

When buying a new car everybody wants to find a zero percent interest deal yet the truth is that only four percent of new cars financed in 2024 had zero percent financing. However, interest rates have started to come down recently and expert economists tell us that interest rates will continue to drop in 2025. According to Bankrate, current rates for a new car as of this writing are as low as 4.99 percent.

Captive lenders that are tied to automakers are in a good place to draw new customers in with low APR or zero percent deals in 2025. That's good for buyer who will be able to choose between a cash discount or a low-APR financing deal right from the automaker.

Expect better deals and incentives throughout 2025 as car manufacturers look to bolster sales without dropping the MSRP on new vehicles. This is especially true when you are searching for a new car from dealerships with a lot of inventory.

Pricing Predictions

Car prices stayed high in 2024 thanks to production costs and limited inventory but that will change in 2025. Consumers are pushing back against the high cost of car buying and we are currently seeing interest rates dropping and auto incentives on the upswing. Expect a drop in overall new car prices from three to five percent in the coming year.

As new 2025 models flood dealerships automakers will increase incentives and discounts of all kinds. Look for higher cash discounts and zero financing deals. Lease offers will get better too. Look for cars that can be leased for under $200 per month.

How We Drive

Another reason for better car deals in the coming year has to do with consumer driving models. Younger drivers are buying fewer new cars because they are driving less in the post-Covid world. Many people are still working from home and have things like groceries and meals sent to them via delivery companies such as Door Dash. Gen-Z and Millennials would rather use Uber than spend the money to own a car. 

It's not just the cost of monthly car payments and fuel that is getting them to shift to being "car free", consider that the cost of car insurance has risen on average 43 percent in the last three years making it the fastest rising cost of any service we buy. And repair costs have jumped too, rising seven percent last year alone.

Put all this together and you can see why people in their 20s are finding other ways to get around rather than buying a new car.
The Bottom Line
Put all these facts together and it is easy to predict that new car sales will drop towards the end of 2025 with high incentives and even zero percent financing available. Plus, the used car market will be stable due to a need for less expensive vehicles and a general lack of quality used vehicles. We predict that the average price of a used car will be around $26,500. At the same time, we will likely see better lease deals that offer excellent incentives. Car makers will likely buckle under continued pressure from consumers and new car prices will continue to drop as we round out 2025.


Let Lithia Help
No matter if you are in the market to sell or buy a used car or are interested in buying or leasing a new vehicle, Lithia Motors has you covered. With over 75 years of experience in providing our customers with personal transportation solutions for all their needs and over 300 dealerships from coast to coast, we want to earn your business and keep you as a customer for life!