Up to date February 28
From December 2024 to January 2025, the common transaction worth of latest 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 mean 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 stated in a Reality Social put up 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 automobiles, will double that day.
On February 19, Trump introduced tariffs “within the neighborhood of 25%” could be imposed on auto imports and semiconductor chips (utilized in practically all trendy automobiles) as quickly as April 2. Whereas particulars are nonetheless scarce, automakers are more likely to move a minimum of some portion of tariff prices to shoppers.
Why are automobiles so costly now?
New automobile costs are excessive for 3 causes:
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Excessive client demand following the Covid-19 pandemic has enabled automobile producers and sellers to maintain costs excessive.
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Ongoing inflation has elevated manufacturing and labor prices, which automobile producers and sellers have handed on to automobile consumers.
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Many new automobiles include superior know-how, bigger infotainment screens, driver-assistance methods, and hybrid/EV powertrains — all including to the price.
On the top of the pandemic, provide chain disruptions and semiconductor chip shortages have been chargeable for slowing, and even halting, automobile manufacturing. As automobile stock decreased, new and used automobile costs skyrocketed and stay elevated immediately.
New automobile costs climbed 22% since 2019
Based on the buyer worth index (CPI), which is a Bureau of Labor Statistics (BLS) measurement of inflation and costs paid by shoppers, new automobile costs have elevated 22% since 2019. Though costs did lower barely in 2024, they ticked again up on the finish of the yr and remained unchanged by means of January 2025, in response to the CPI report launched Feb. 12.
Common new automobile costs are nonetheless roughly $11,000 larger 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 elevate income. The purchaser of the products (akin to a carmaker shopping for components) pays the tariff and will select to move that value on to shoppers.
Will automobile costs proceed to go up below Trump?
On prime 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 are going to 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. The complete impact tariffs may 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 worth by as much as $6,250, with importers more likely to move most or all of this enhance alongside to shoppers.
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, .
What about auto financing charges and funds?
On prime 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 degree in years in the course of the pandemic, they usually’ve barely budged down. Based on J.D. Energy, the common new automobile cost was on tempo to be $734 in January.
Though presidents don’t management rates of interest, their insurance policies could affect them. When costs total start to rise, the Federal Reserve normally will increase the federal funds fee to gradual financial exercise and cut back inflation. When the federal funds fee adjustments, auto mortgage charges sometimes comply with. The next chart reveals motion of the federal funds fee since 2021.
Are used automobile costs dropping?
Sure. Based on Cox Automotive, in January 2025 the common used-vehicle itemizing worth was $25,128 — a lower of roughly $650 from the earlier month.
Used automobile costs have steadily decreased all through 2024; nonetheless, used automobile stock has been tight because of fewer off-lease autos being returned and house owners preserving their automobiles longer.
If new automobile costs enhance, we may see a repeat of automobile consumers turning to used automobiles as they did in the course of the pandemic. The outcome then was additional tightening of low stock, which drove used automobile costs larger — in some circumstances, larger than new automobile costs.
Automotive possession value presents a further problem
The upfront worth of automobiles 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.
Automotive possession prices grew at a double-digit annual fee each month from April 2021 to November 2022, in response to NerdWallet’s possession index. That development has slowed total, 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 time to purchase a automobile?
For those who anticipate wanting or needing a brand new automobile within the subsequent few years and might afford to purchase now, it could be a good suggestion to take action. Though automobile costs, auto mortgage rates of interest and possession prices are larger now than they have been 5 years in the past, they could climb even larger. Shopping for whereas stock is plentiful may prevent cash.
“Decrease auto mortgage charges now look much less doubtless sooner or later, so including tariff threat factors to an setting the place it’s higher to purchase sooner fairly than later, all else being equal,” in response to Cox Automotive Chief Economist Jonathan Smoke.
To cut back automobile prices as a lot as doable earlier than shopping for, comply with a couple of easy steps.
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Test on-line pricing guides akin to Kelley Blue E-book, Edmunds or NADA guides to know what worth you need to pay.
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Use an auto mortgage calculator to find out the most effective situation — mortgage quantity, rate of interest, time period and down cost — for a month-to-month cost that matches your finances.