Will Car Prices Go Down in 2025? Here’s What We Know

When will car prices go down in 2025? Consumers ask this question after seeing car prices surge for nearly five years. Spending 50 grand on a car isn’t exactly ideal, so the world is looking for relief. The price tags you see on dealership lots will depend on a few factors. So here’s what you need to know. 

Will We See a Car Price Increase or Decrease in 2025?

The most likely outcome is soaring car, truck and SUV prices because of tariffs. President Trump has leveraged executive power to raise duties on numerous countries where cars come from. Mexico and Canada are two significant players in the equation, as Ford and General Motors (GM) manufacture vehicles in these countries. 

Recently, Trump announced a 25% tariff on all auto imports to raise revenue. However, the levies make life more complicated for manufacturers because many import parts or complete vehicles from outside countries. If an automaker has to pay more, it will likely pass on the cost burden to the consumers. Therefore, more money leaves your wallet. 

The Price Is Not Right

A few years ago, automakers cited supply chain issues as the reason for higher price tags, but it’s mostly on tariffs now. These levies have already started the trend of car price increases nationwide, and it could get even worse. A 25% tariff means a truck that cost $50,000 last year will easily exceed $60,000 on the lot. 

The rise has gone beyond hypotheticals — dealers are saying they’ll happen. For example, a Philadelphia business owner said $30,000 cars would increase to $40,000 because of the tariffs. For families or first-time car buyers, making the big purchase could be significantly more difficult. Some might be sticking with their current vehicles for the foreseeable future. 

The Consequences of Continued High Car Prices

A country with 340 million people and lackluster mass transit needs cars. If people can’t afford new vehicles, dire consequences could ensue. Here are a few ramifications of the sky-high costs. 

1. People Keep Their Cars

If new car prices are high, people are less likely to trade in their old ones. While Toyotas are famous for their reliability, they can only travel so far before you need a new vehicle. Drivers staying in their current cars means fewer used vehicles are on the dealership lots, further weakening the supply.  

Driving older cars until they break down could be detrimental because of the wear and tear. These vehicles require frequent maintenance and expensive repairs, such as engine or transmission replacements. After all, it boils down to how well you maintain the car during its life span. Once you cross the 200,000-mile mark, time starts ticking.

2. Used Car Prices Increase

Kelley Blue Book says customers are paying $48,039 for new cars — a 1% increase from 2024. That means a six-year loan will cost about $667 each month before you include interest payments. If the price is too high, people will flock to used cars and increase demand. Therefore, the costs could significantly increase with these older vehicles. 

It shouldn’t be surprising that experts are already weighing in and saying used car prices will increase. Art Wheaton of Cornell University told ABC News that the price increases will make the used market more competitive and cause price surges. So, if you want to buy a used car, inspect the vehicle well and make your purchase count. 

3. Dealerships Feel the Impact

Automotive tariffs significantly affect whether car prices will go down and how much buyers will pay. That said, the levies also affect the middle of the supply chain — the dealerships. Sales associates have to make their money somehow, and people not buying as many cars could hurt their commission. 

While the automotive tariffs have only recently taken effect, dealerships are already feeling the heat. One business in Austin said the policies will impact people with a lower socioeconomic status because they’re less likely to afford a car. Therefore, they have fewer people to sell cars to, regardless of where the demand stands. 

Could a Car Price Decrease Come in 2025?

Not all hope is lost if you’re wondering whether car prices will go down in 2025. Optimists can circle a few factors, starting with the Federal Reserve. If the Fed cuts rates in 2025, that could indirectly lower the cost of new vehicles by lowering the interest rates. Then, consumers may be more enthusiastic about buying a car. 

However, that depends on the Fed’s decisions during the calendar year. Anticipating what Jerome Powell and the others will do is a guessing game, but experts say up to three cuts could happen in 2025. The Fed has yet to decrease rates in 2025 due to uncertainty in the economic outlook, thus leading to a more cautious approach to the adjustments. 

Another indirect way to see a car price decrease is through dealer incentives. If auto businesses see fewer happy customers drive off the lot, they could introduce enticing deals to rope them back in. Incentives are a way for automakers to decrease prices without diminishing the MSRP. Some examples include lower APR rates, gift cards and rebates.

If Not 2025, When Will Car Prices Go Down?

The new reality is new cars are in high demand and will continue to be expensive, regardless of tariff policies. However, the most recent levies don’t do consumers any favors. The U.S. is an automobile-centric country that will consistently sell cars until drivers have more transit options. Therefore, car prices will likely remain high for the foreseeable future. 

Since the pandemic, automakers have turned to different manufacturing principles for heightened efficiency. These companies used to produce a surplus of vehicles to ensure dealerships had enough supplies in case emergencies arose. However, more automakers have adopted Toyota’s just-in-time philosophy while focusing production on the most expensive models. 

Waiting on a Car Price Decrease for Our Wallets

If you need a new vehicle, now might not be the best time to purchase one. However, it doesn’t hurt to research great deals and use your negotiation skills at the dealership. Used cars could be your best path forward, so check for one that has a good price and is in good condition. Until then, you may wonder when car prices will go down to help your bank account.