The automotive market is bracing for turbulence, and it’s not solely due to international trade tensions. While tariffs introduce complexities, a deeper issue is brewing beneath the surface, particularly impacting the availability and affordability of used vehicles, making New Car Sales a focal point for savvy buyers in the coming years.
The year 2022 marked a low point for new car sales, a direct consequence of COVID-19-induced supply chain disruptions that crippled vehicle production. This slowdown, while seemingly in the past, is now poised to create a ripple effect, significantly tightening the used car market, especially for the sought-after three-year-old models. These vehicles, typically considered the sweet spot for used car buyers—depreciated yet still relatively young—will be in short supply in 2025, making the prospect of buying new cars increasingly attractive.
Cars parked in a dealership lot, representing car loans and new car sales
The Looming Used Car Shortage and Its Impact on New Car Sales
Edmunds, a prominent car shopping and automotive information platform, forecasts a challenging landscape for used car buyers in 2025, specifically for three-year-old vehicles. The diminished new car sales of 2022 are the primary culprit. With only 13.8 million new cars sold that year—the lowest figure since 2011 during the Great Recession recovery—the pool of vehicles entering the used market three years later will be significantly reduced. This scarcity is anticipated to drive up used car prices and potentially shift consumer focus towards the new car market.
Brian Moody, executive editor at Kelley Blue Book and Autotrader, confirms this anticipated impact, stating, “We kind of have known since COVID that that was an impact that was coming.” This acknowledgment from industry experts underscores the validity of concerns regarding the used car market and its indirect influence on new car sales strategies and consumer behavior.
Lease Returns Dwindling, Further Fueling New Car Sales Consideration
The shortage is further exacerbated by a sharp decline in vehicle leases in 2022. Leased vehicles traditionally constitute a significant portion of the used car inventory after lease terms conclude. However, with fewer leases originated in 2022, Edmunds projects leased vehicles to represent a mere 18% of used car sales in 2025—the lowest level since the Great Recession. This dramatic decrease from over 4 million off-lease vehicles annually between 2019 and 2022 to an estimated 2 million this year significantly restricts the supply of quality used vehicles, potentially pushing consumers towards exploring new car sales options.
Ivan Drury, director of insights at Edmunds, emphasizes the broad impact, noting that “gently used” vehicles across the two- to four-year-old range will be scarce in 2025. These near-new used vehicles are typically highly desirable due to remaining warranty coverage and substantial depreciation, offering a perceived value proposition. Their reduced availability in 2025 may compel buyers to reconsider purchasing new cars, especially when the price gap narrows.
New Car Prices in Context: Tariffs and Market Dynamics
While used car prices are expected to rise due to scarcity, the new car market also faces price pressures, particularly from potential tariffs. The average price for a new vehicle in January reached nearly a record high of $48,118, according to Edmunds data. Coupled with fluctuating trade policies and the possibility of tariffs on imported auto parts and vehicles, the cost of new cars could further escalate.
The threat of tariffs, as highlighted by recent trade actions, introduces uncertainty into the automotive market. While temporary exemptions may provide short-term relief, the potential for increased costs, especially on vehicles priced under $40,000, remains a concern. This tariff impact could potentially reduce dealer incentives and discounts on new cars, further influencing the new car sales landscape.
However, David Bennett, manager of repair systems at AAA, points out that tariffs are likely to impact new car prices more directly than used car prices. If tariffs make new cars less affordable, demand for used cars could surge, indirectly driving up used car prices as well. This complex interplay of factors necessitates a careful evaluation of both new and used car markets when making purchasing decisions.
Why Buying New Cars Might Be a Strategic Move in 2025
Despite rising average new car prices and tariff concerns, the unique market conditions in 2025 may surprisingly favor new car sales for many buyers. The anticipated premium on gently used vehicles will bring their prices closer to new car prices, diminishing the traditional cost advantage of used cars.
Furthermore, new car sales often come with attractive financing options. Dealers commonly offer discounts and promotional interest rates, sometimes as low as 2%, particularly on new models. In contrast, the average interest rate for used car loans hovers around 11.3%, according to Edmunds. This significant difference in financing costs can substantially offset the initial price difference between a new and a used vehicle, making new car sales a financially competitive option.
Alex Knizek, associate director of auto test development at Consumer Reports, astutely observes, “Our intuition says that buying used is always cheaper than new, but it may not always be the case.” In 2025, this intuition may prove particularly inaccurate as the converging factors of used car scarcity and competitive new car financing reshape the car buying equation.
Considering Your Options: From Older to NEW Vehicles
Faced with a potentially expensive and limited used car market, and with new car sales becoming increasingly appealing, consumers should explore a broader range of vehicle options.
While three-year-old used vehicles may be scarce and pricey, considering slightly older vehicles—perhaps five years or older—could present a more budget-friendly alternative. Modern vehicles are engineered for enhanced durability, with the average vehicle age on American roads now approaching 13 years. As Ivan Drury from Edmunds notes, “Things have gotten a lot better with durability. Your motor’s going to keep going.”
Another avenue to explore is the luxury used car market. Luxury vehicles tend to depreciate more rapidly than mainstream models. Therefore, a slightly older luxury vehicle could offer significant value and features at a more accessible price point. As Brian Moody suggests, “I might be perfectly happy to have a 5-year-old Mercedes-Benz because, for me, this would be the nicest car I’ve ever had.”
Finally, and perhaps most surprisingly, buying a new vehicle emerges as a strong contender in 2025. With used car prices projected to be high, favorable new car financing rates, and the peace of mind of a new vehicle warranty, new car sales are poised to become an increasingly attractive and sensible choice for car buyers navigating the evolving automotive market.
Conclusion: Embracing New Car Sales in a Shifting Market
The confluence of factors—used car shortages, rising used car prices, competitive new car financing, and potential tariff impacts—paints a complex picture for the 2025 automotive market. While the used car market faces significant constraints, the new car market is strategically positioned to offer compelling alternatives. For consumers seeking reliable transportation and value in 2025, exploring new car sales, understanding available incentives and financing, and carefully weighing their options will be crucial to making informed and advantageous purchasing decisions in this dynamic environment.
