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New car prices still high in 2025 despite incentives. Will car prices drop this year? Expert insights on sales, tariffs, and buying tips.
- What is the current auto tariff situation?
- How much will new car prices increase?
- Are tariffs affecting used car prices?
- Why are cars so expensive in 2025?
- Are car sales down in 2025?
- What about financing and ownership costs?
- Is now a good time to buy?
- How to find the best deal
What’s Happening With New Car Prices in 2025?
If you’re planning to buy a new car in 2025, you’ve probably noticed that new car prices are still high. According to Cox Automotive’s Kelley Blue Book data, the average manufacturer’s suggested retail price (MSRP) for new vehicles in August stood at $51,099. That’s about $10,500 higher than five years ago.
The price climb isn’t as sharp as many feared when tariffs and supply issues hit earlier this year, but cars are definitely not getting cheaper. Analysts say buyers shouldn’t expect big discounts anytime soon.
Expert Viewpoint
Erin Keating from Cox Automotive notes that prices are rising “at a measured pace, rather than a seismic shift.” That means car prices are edging up slowly but steadily.
What is the Current Auto Tariff Situation?
One of the biggest drivers of pricing pressure has been tariffs. In April, the U.S. imposed a 25% tariff on imported cars and auto parts like transmissions and powertrain components. These tariffs have pushed production costs higher, which trickles down to buyers.
Some automakers have tried to absorb part of the tariff cost, but as The White House tariff updates show, higher duties on imported vehicles and parts remain in place, leaving carmakers with little room to cut prices.
Are Car Sales Down in 2025?
Despite higher costs, retail sales in August were actually up 2.5% compared to last year. However, analysts expect sales growth to slow toward the end of 2025.
According to Autotrader editor Brian Moody, “except on a few models, big discounts will be increasingly hard to find.” This suggests that even though car sales aren’t collapsing, buyers are still feeling the pinch.
So while we can’t exactly say car sales are down in 2025, the overall pace is being held back by affordability challenges.
How Much Will New Car Prices Increase?
Cox Automotive projects new vehicle prices could climb 4% to 8% by the end of 2025, especially with 2026 models rolling in. Larger vehicles, like full-sized pickup trucks, already have an average transaction price of over $65,000.
Meanwhile, electric vehicles (EVs) tell a mixed story:
- EV prices in August were nearly flat year over year, averaging $57,245.
- Tesla’s average price fell 5.5% year over year to $54,468.
- But as federal EV tax credits phase out this September, EV affordability may worsen.
Why Are Cars So Expensive in 2025?
There are several reasons why car prices remain high:
- Tariffs on imported cars and parts.
- Limited supply of popular models — Toyota, Lexus, and Honda vehicles are harder to find.
- Higher production costs due to labor and materials.
- Added tech features like big infotainment screens and driver-assistance systems.
- Insurance and financing costs pushing overall ownership higher.
In fact, Edmunds reports that almost 20% of new car buyers now commit to monthly payments of $1,000 or more.
Are Car Prices Dropping Anytime Soon?
This is the big question buyers keep asking: will car prices drop in 2025?
The short answer is not significantly. While prices aren’t climbing as fast as some feared, analysts like Edmunds’ Jessica Caldwell believe automakers will stay cautious with incentives. Instead of prices dropping, most buyers will only see modest discounts on select overstocked brands like Land Rover, Ram, Lincoln, Audi, and Mitsubishi.
So while headlines may suggest car prices dropping, the reality is that average prices are still high and unlikely to fall sharply this year.
What About Used Cars?
If new car prices rise further, more buyers could shift to the used market. That creates demand pressure, keeping used car prices elevated. According to Edmunds, the average three-year-old used vehicle still costs over $31,000, close to record highs.
Financing and Ownership Costs
Beyond sticker price, financing is another challenge:
- The average new car loan amount is now about $42,388.
- Loan terms are longer, and down payments are shrinking.
- Higher insurance premiums add to the overall cost.
The good news? A new law now offers a tax deduction on auto loan interest up to $10,000 per year for eligible buyers. This may provide some relief if you’re financing a new car.
Is Now a Good Time to Buy?
If you’re waiting for big discounts in December, experts warn you may be disappointed. David Greene from Cars.com says new car inventory is already 6% lower than last year, so once 2025 stock is gone, buyers may pay more for 2026 models.
One possible exception: electric vehicles, which still qualify for federal tax credits — but only through September 2025. If you’re eyeing an EV, now may be the best time.
How to Find the Best Deal
Here are a few simple tips to stretch your budget:
- Shop around and stay flexible on model choice.
- Check official automaker sites for promotions.
- Use online tools like Kelley Blue Book or Edmunds to check fair prices.
- Compare auto loan offers to lock in the best rate.
- Don’t forget trade-in value — shopping around for your old car’s best offer can save thousands.
Bottom Line
In 2025, new car prices are still high, and while buyers keep asking will car prices drop in 2025, the reality is that only limited relief is expected. For most shoppers, the best strategy is to act quickly on incentives, consider a broader range of models, and explore EV options before credits expire.
Cars may not be getting cheaper, but with smart shopping, you can still find a deal that fits your budget.
FAQs on New Car Prices in 2025
1. Will car prices drop in 2025?
Experts say big price drops are unlikely this year. While some overstocked models may see discounts, most buyers should expect modest price increases as 2026 models arrive.
2. Are car sales down in 2025?
Not exactly. Retail sales are slightly up compared to 2024, but affordability challenges are slowing demand. Analysts expect growth to remain flat toward the end of the year.
3. Why are new car prices still high?
High tariffs, supply shortages, rising material costs, and expensive new technologies are all factors keeping car prices elevated.
4. Are car prices dropping for electric vehicles?
EV prices were flat year over year in August. Tesla’s average price actually dropped 5.5%, but upcoming tax credit expirations could make EVs more expensive later in 2025.
5. Is it a good time to buy a new car?
Yes, if you find the right deal. Waiting may not help, as inventory is shrinking and tariffs are keeping costs high. EV buyers especially should consider buying before tax credits expire at the end of September 2025.
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