Car Prices in 2025: Trends to Watch

As 2025 progresses, car prices remain a defining concern for buyers worldwide. Whether you're planning to buy new or used, across sedans, SUVs, or EVs, understanding emerging trends is essential for smart financial decisions. Here’s what you need to know.

1. New Car Prices Holding Near Record Highs

In mid-2025, the average price for a new car hovers around $48,700, only slightly below the all-time peak set in late 2022. New car prices saw a modest rebound in April, with YoY increases of around 1.3% and a sharp 2.5% monthly rise—the highest since April 2020. Buyers should anticipate prices to remain firmly elevated throughout the year.

2. Used Car Prices Starting to Ease

Good news for the used-car market: after a surge in previous years, prices are finally softening. As of August 2025, the average used car price is $25,512, continuing a multi-week decline across both retail and wholesale channels. Despite this trend, some segments—especially well-maintained 3-year-old vehicles—are seeing price increases, with averages climbing to $30,522, driven mainly by a shortage of high-quality trade-ins.

3. Tariffs Are Beginning to Bite

A key factor expected to influence prices into 2026 and beyond is rising tariffs, particularly in the U.S. Automakers are planning to pass on these costs, predicting an average car price increase of about 6.3% next year. The U.S. auto industry is bracing for further price hikes as tariffs on imports from Canada and Mexico take effect.

4. China’s EV Price War Disrupts Global Pricing

In China, fierce competition among EV makers like BYD, Leapmotor, Xpeng, and Xiaomi has sparked aggressive price reductions and promotions. While this has made EVs more affordable domestically, it also underscores a global shift that pressures established automakers to keep pace—potentially improving pricing options for buyers everywhere.

5. Supply Pressures Still at Play

Despite slowing price rises, tight supply continues to shape the market. Retail and wholesale inventories remain lower than in 2024, keeping pressure on both new and used car prices. Buyers should be aware of limited availability, which can limit negotiating power even as average prices stabilize.

6. Smarter Manufacturing May Yield Future Price Relief

Looking ahead, innovative manufacturing approaches could help reduce costs. Automakers like Ford are investing in modular production techniques—streamlining assembly and reducing parts. This shift could eventually bring down vehicle prices, particularly for EVs.

Summary Table: Car Price Trends in 2025

What This Means for Buyers

• New Car Buyers: Be prepared for strong price levels throughout 2025. Act during model-year clearances or promotions to get better deals.
  

• Used Car Buyers: This is a better time to buy—prices are trending downward. Consider certified pre-owned options for quality and value.
  

• EV Shoppers: Watch for pricing pressure and incentives. Chinese-made EVs are leading aggressive cost strategies.
  

• Global Buyers: Tight supply could still limit choice, so flexibility and timing matter.
  

• Future Prospects: Innovation in manufacturing and shifts in policy may eventually ease price pressures—especially for EVs.
  

Conclusion

The story of car prices in 2025 is one of contrasts—new cars remain close to record highs, while used car prices are gradually cooling. Tariffs and supply chain challenges continue to exert upward pressure, but innovations in manufacturing and the EV price war, particularly in China, may create opportunities for cost savings in the future.

For buyers, the key is timing and flexibility: acting on deals when they appear, considering certified used models, and exploring EV incentives. While affordability remains a challenge today, the evolving dynamics of tariffs, global competition, and smarter production could reshape the landscape in the years ahead.