In 2024, car buyers got a very slight respite from the record-high car prices we’ve seen for almost half a decade now, and it seems like that trend will continue through 2025 thanks to dealers offering more and more cash on the hood of new cars. Stock at dealerships has pretty much recovered to pre-pandemic levels, and that’s forcing sellers to more aggressively price their unsold vehicles.
That means car buyers got about $3,400 in discounts and other incentives during December. That’s up over 25 percent from last year, according to data from JD Power reported by the Wall Street Journal. These offers have also included low-and zero-percent interest rates, cash-back offers and cheap leases, especially for electric vehicles. That’s a segment of the market that has really been struggling.
These strong incentives have been a great relief to buyers who were recently shelling out sticker price or above for cars, and because of that, industrywide sales in the U.S. rose seven percent in December. Here’s more from the Wall Street Journal:
For the year, U.S. vehicle sales are expected to rise 3%, to about 16 million vehicles sold, decelerating from 12% growth in 2023. Industry forecasters expect sales to edge slightly higher again next year.
[…]
The U.S. car market hasn’t returned to the 17-million-vehicle annual sales mark that held steady for several years before the pandemic disruptions. Analysts and car executives say that is partly because many shoppers remain priced out of the market, despite the recent return of promotions and discounts.
Higher interest rates have kept monthly payments elevated relative to prepandemic levels. Also, a dwindling number of smaller, cheaper cars for entry-level buyers has curbed overall sales.
Average discounts are currently about 8% of the sticker price, according to research firm Cox Automotive, up sharply from recent years but still below the 10% industry prepandemic norm.
The affordability problem is one of several factors clouding the outlook for the car industry heading into the new year, despite the steady pace of vehicle sales and a stable economic picture.
Weak-ish electric vehicle demand is also hurting bottom lines for dealers and manufacturers alike. It has even forced some automakers to backtrack on their future EV plans, and none of this even takes into account what’ll happen once Donald Trump is back in office on January 20. His proposed tariffs could make a mess of the auto industry.
Mexico has emerged in recent years as a bigger source of lower-priced U.S. models. Mary Barra, General Motors’ chief executive, in December said that Trump’s proposed tariffs could have a “very substantial impact” on the carmaker.
Some automakers have laid off workers in recent months, including GM and Stellantis, whose CEO abruptly resigned in early December.
Carmakers will need to work harder in 2025 to attract customers because the pent-up demand from several years of vehicle shortages has largely been filled, analysts say. Many car owners also face elevated interest rates, repair bills and insurance premiums.
Anyway, as availability and stock continues to rise, prices should continue to fall for buyers. That’s very welcome news. WSJ explains:
There were about 2.7 million vehicles on U.S. dealer lots or en route to stores at the end of December, up 17% from a year earlier, according to research firm Wards Intelligence.
Supply is uneven across manufacturers, though, and some carmakers are still operating with thin inventory, meaning consumers loyal to a particular brand may not get the sweetest deal. Toyota’s inventory remains tight, and the Japanese car brand has discounted less than rivals, according to Cox Automotive.
Electric-vehicle shoppers have the best shot at finding a good offer right now, particularly for those willing to lease a vehicle instead of buying it outright.
It’s about time prices normalized like this. Cars are really goddamn expensive, man, and with them piling up on dealer lots because of a lack of affordability, it’s good to see dealers giving buyers a bit of a break.
