Car Prices Hold Steady, But Value Slips: CarGurus Report
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Tariff Announcements: Demand Pulled Forward, Uncertainty Lingers
The first half of 2025 was anything but predictable for the auto market. Tariff headlines in late March set off a pronounced, short-lived rush in new vehicle purchases as buyers tried to get ahead of potential price increases. In the ten days following the announcement, new vehicle sales soared by 48% compared to the same period a year ago. But just as quickly as it came, the surge faded, with sales growth moderating for the rest of April. For dealers, it was a classic demand pull-ahead: plenty of excitement up front, followed by the market settling back to its usual seasonal pace. The question now is whether conditions will remain steady, or if a dip is still in the cards later this year.
Interestingly, despite all the anticipation of significant price hikes, the overall average new vehicle list price has barely budged from around $49,600. Beneath this stable surface, though, the shifts have been anything but even. Luxury SUVs and performance vehicles saw notable price jumps from post tariff, while EVs and large SUVs experienced price drops during the same timeframe. The result has been an uneven impact across segments and brands.
Affordability Under Pressure, Especially for Sub-$30K Vehicles
While broad-based tariff-driven price increases remain limited for now, affordability at the entry level has sharply deteriorated. Listings for new vehicles priced below $30,000 have dropped by 18.7% since late March, with compact cars and crossovers seeing the steepest declines. Nearly half of all new vehicle listings now reflect post-tariff pricing, which leaves budget-conscious buyers with far fewer choices.
This shrinking pool of affordable inventory is not just a headache for consumers. It is also a challenge for dealers, who are increasingly left with slower-turning, higher-priced vehicles that appeal to a shrinking segment of buyers. If automakers respond to tariffs by scaling back incentives, the affordability crunch could intensify further and push even more buyers out of the new vehicle market.
Used Market: Inventory High, Options Limited
The used vehicle market tells a different story. Supply is abundant, with inventory levels now at multi-year highs. However, choice remains limited where it matters most. The most sought-after 3- to 4-year-old models are still hard to find and carry a premium, largely because pandemic-era production shortfalls continue to ripple through the market.
For shoppers trying to stay under the crucial $20,000 mark, the options increasingly involve older, higher-mileage vehicles. The result is a trade-off between affordability and quality that many buyers can’t avoid.
Fuel-efficient hybrids and smaller cars are moving off lots quickly, underscoring the ongoing consumer preference for value and practicality. Meanwhile, larger SUVs and plug-in hybrids are sitting longer, even as their prices become more competitive.
Hybrid Momentum Grows as EV Demand Evolves
After a breakout year in 2024, hybrids have maintained strong momentum in 2025. They remain the fastest-growing new vehicle segment, driven by steady demand, affordable pricing, and quick inventory turnover. Most shoppers are weighing hybrids against traditional gas-powered vehicles, reinforcing a preference for practical, value-oriented choices.
EV sales are still growing year over year, though not at the pace of hybrids. What stands out this year is that shoppers considering EVs are most often weighing them directly against comparable gas-powered models, rather than hybrids. This direct comparison puts even greater focus on EV price parity, especially as the future of federal EV incentives remains uncertain. For the broader market, hybrids continue to be the preferred option for buyers focused on both efficiency and affordability.
Looking Ahead: Key Trends to Watch for the Remainder of 2025
As we move into the second half of the year, several trends will be worth watching closely:
Demand After the Tariff Surge: Will the April pull-ahead leave a hole in Summer and Fall sales, or can the market sustain momentum through year-end?
Price Pressures and Incentives: How long can OEMs keep prices in check as incentives expire and cost pressures mount? Watch for potential sharp price increases, especially as we head toward late summer.
EV Tax Credit Uncertainty: Ongoing questions around federal EV tax credits could influence consumer demand. It remains to be seen whether automakers and shoppers will adapt if credits change or disappear.
Interest Rates: Tariffs have added another layer of complexity to the Federal Reserve’s already challenging job of trying to avoid a hard landing for the economy. This means consumers are likely to see limited relief on auto financing rates, as the cost of borrowing remains high for both buyers and dealers.