After the conclusion of the US election, consumer confidence has seen improvement and the demand for purchases in both the housing and automotive markets has increased. As we enter 2025, Cox Automotive, a senior automotive market research institution in the United States, has made five major predictions for the automotive market for consumers to consider.
In recent years, whether it is buying a house or a car, the persistently high mortgage interest rates have been a significant barrier for many potential buyers, leading to consumers habitually delaying their purchasing decisions. However, considering various current indicators, Cox Automotive believes that indefinitely waiting for interest rates to drop before buying a car is no longer a sound strategy.
On December 18, the Federal Reserve announced a 25 basis point rate cut, while indicating a slowdown in future rate cuts for the upcoming year.
Industry experts are largely optimistic about the automotive market in 2025, believing that the market trends will be more favorable to consumers at least in the short term over the next few months.
Cox Automotive has forecasted several trends for the automotive market in 2025.
Industry insiders anticipate that changes in electric vehicle tax credit exemptions will bring about a wave of impact on the market; significant actions by the new government in tariff and immigration policies could also potentially reignite inflation.
However, Cox Automotive’s Chief Economist Jonathan Smoke pointed out that the automotive industry’s response is generally slower to external policy changes, and even if policies change externally, the market typically does not immediately follow suit. Therefore, for most of 2025, the automotive market is expected to continue its current strong momentum.
On the other hand, consumer concerns regarding policy changes have intensified the urgency to “purchase immediately,” prompting many to start browsing and buying cars.
Post-pandemic, automotive prices and loan costs have been on the rise. Cox Automotive anticipates more improvements in the coming year: loan service supplies will continue to increase, and there will be several rate cuts in the market over the next few months.
Currently, the industry has witnessed a decline in automotive loan rates due to lending institutions gaining confidence in the economic outlook and stability of used car prices, thereby being willing to decrease rates. It is expected that the average automotive loan rate in 2025 will be a full 1 percentage point lower than the peak in early 2024.
Furthermore, the inventory of new cars in 2025 will continue to show an upward trend, leading manufacturers to offer more incentives.
With the increase in new car inventory and purchasing power, Cox Automotive believes that 2025 will be the best year for the market since 2019, with new car sales reaching 16.3 million vehicles. Car sales and the trade-in model will also return to normalcy in a year that marks the end of the pandemic.
Unfortunately, certified pre-owned car inventories are expected to face severe shortages in 2025.
The growth trend of electric vehicles in recent years has been sluggish, but Cox Automotive believes that electric vehicle sales in the United States will continue to rise: around 15 new electric vehicle models will be introduced to the American market in the coming year, with an increase in hybrid and plug-in hybrid vehicles as well.
However, there are considerable variables at play: the transitional team of the Trump administration is planning to eliminate the $7,500 consumer tax credit for purchasing electric cars and close the “leasing loophole.”
Cox Automotive states that this variable may not occur immediately and might not materialize at all, as everything is subject to negotiation. If the credits and subsidies are indeed canceled, electric vehicle sales could experience a surge before the policy implementation.