Is Now the Time to Buy, Sell, or Trade in a Car?

Quick Facts About the Buying and Selling Marketplace

• Tariffs have begun raising car prices, but only mildly so far and not at all for some brands.
• Both new and used car prices held steady in May.
• Tariffs will radically change prices in the coming months.

Unprecedented auto industry tariffs have set in, and prices at America’s car lots are starting to rise. However, the increases so far have been softer than expected. They’re also unevenly distributed. Some automakers have pledged to hold prices flat through June, while others have already started raising the price you see on the window sticker.

Car shoppers heading out to sales lots could see the last vestiges of a good market. It won’t last, and it may take research to find exactly what you want to buy.

We never advise anyone to rush into an expensive purchase that, for many, involves taking on years of debt. If you’re on the fence about shopping this year, you might still want to batten down the hatches and ride out the chaos in your existing car.

We’ll explain what to expect when buying a new or used car, or selling or trading one in, and why it might make sense to act quickly.

• What New Car Shoppers Can Expect
• Each Automaker Responding Differently
• What Used Car Shoppers Can Expect
• Older, Less Expensive Cars Harder to Find
• Automakers Are Building More Expensive Cars
• How to Buy a Car Right Now
• Selling a Car Right Now
• Trading in a Car Right Now
• Looking Ahead
• Tips for Buying a Vehicle Right Now

What New Car Shoppers Can Expect

The average new car buyer paid $48,799 in May, flat compared with April. With tariffs raising the cost of importing a new car by 25%, this is just before the pricing storm begins. Dealerships keep at least 30 days of stock or more on hand so they have cars to fall back on until imports arrive with tariffs.

It’s also likely the first wave in the storm. The federal government has begun charging tariffs, but many car dealers had a supply of new cars already in the country at pre-tariff prices when the news hit. They’ll pay higher, tariffed prices for replacement inventory only after they sell those.

That will happen on different dates based on how many cars each brand had in the country on the day tariffs began. For some with low inventory like Toyota and Lexus, that date has arrived. Others will continue selling pre-tariff inventory, including some for several months.

RELATED: When Will New Car Prices Drop?

Americans flocked to car dealerships this spring to buy up pre-tariff inventory, but sales began to slow in April. In May, sales stayed about the same.

We find that time, not money, is the best way to understand how a new car impacts your finances. The Cox Automotive Moody’s Analytics Vehicle Affordability Index shows how long the average earner would need to work to pay off the average new car. After several years of steady improvement, it held steady in May, when compared with April, but affordability remains at the worst level this year. Cox Automotive is Kelley Blue Book’s parent company.

Each Automaker Responding Differently

Car pricing is complicated, and each automaker has responded to tariffs differently. As long as the tariffs remain in place, their responses are likely to shift constantly.

Some, like Hyundai and Mercedes-Benz, have pledged not to raise prices for now. Others are deciding on a case-by-case basis. Ford has raised prices on its Maverick pickup, Bronco Sport SUV, and Mustang Mach-E electric SUV to compensate, but kept most prices stable.

RELATED: How Each Automaker is Responding to Tariffs

Automakers can absorb some of the cost of tariffs for a while. They might even respond by raising one car’s price to help pay the tariff on another.

With so much constantly shifting, your best tool for understanding local price changes is the Kelley Blue Book Fair Purchase Price, which we calculate using recent transactions for that car in your area. We update each Fair Purchase Price weekly, showing you how tariffs and tariff anxiety are impacting the prices of the specific vehicles you’re shopping where you live.

The Fed Continues to Pause Interest Rate Cuts

Prices are all that cash buyers need to worry about. However, few car shoppers are cash buyers. Most Americans borrow money to buy a new car.

The current credit market is mixed. Lenders are approving more loans, including for those with bad credit. Still, more consumers are opting for longer loan terms of 72 months or 6 years, even though it means paying more interest.

The Federal Reserve, commonly called “the Fed,” sets the federal funds rate, the interest rate banks use when they lend each other money. The federal funds rate determines interest rates for every type of loan, including car loans. It’s still on the way down, which should ripple through the economy over the next few months.

Due to economic uncertainty, the Fed has kept rates steady in recent months. At its June meeting, the Fed did the same and held rates. Even expert analysts don’t know when to expect the next rate change. The central bank tends to provide a prediction of its future decisions, but it declined to release the predictive “dot plot” this time.

The credit market is unlikely to improve in the short term while banks, like the rest of us, wait to see how tariffs impact car shopping in the next few months.

What Used Car Shoppers Can Expect

The average used car buyer paid $25,470 in May, about $20 less than a revised $25,490 in April. While steady, used car prices often rise when new car prices do. When that happens, higher new car sticker prices inevitably send some would-be new car shoppers to the used car lot instead. We are watching closely for both.

Low inventory levels for used vehicles may compound the problem. Dealers ended May with a 43-day supply of cars to sell, down a day from the month earlier (and down two from a year ago). The tight supply of used cars is below what dealers consider normal.

Nationwide, the used car supply will likely remain thin for years. Pandemic-era disruptions meant automakers built about 8 million fewer cars than they normally would have in 2021 and 2022. Millions of cars will never reach the used market, keeping supplies low for a long time.

Dealers restock used vehicles at auctions. While wholesale prices came down in May from April, they were up 4% from the year earlier. Car buyers are already price-sensitive. Wholesale prices trickle down to retail prices about six weeks later. When wholesale prices dip or climb, retail prices follow.

Older, Less Expensive Cars Harder to Find

If you hope to find an older vehicle and your budget is less than $15,000, these cars remain in short supply. Dealers have just 31 days’ worth of used cars priced under $15,000 — five days lower than the same time last year and 12 days below the overall industry average.

However, the tariff threat could push used car prices higher. When new car prices rise, would-be new-car shoppers head to used lots looking for something still in their price range. More would-be new car shoppers start buying up the available used vehicles, drawing down the inventory. Plus, Americans are holding onto their cars longer than ever. The average vehicle on American roads is 12.6 years old. Automakers also produced fewer cars for several years after the 2008 recession, leaving fewer higher-mileage, older used vehicles available to sell.

The most accessible used cars carry prices between $15,000 and $30,000.

Automakers Build More Expensive Cars

If you haven’t been car shopping in a while, the cars on offer may surprise you.

In recent years, inexpensive cars have grown scarce. Recent analysis finds that sales of vehicles priced at $25,000 or less have fallen by 78% in just five years. Six years ago, automakers offered 36 new models in that price range. By late 2023, that number was just 10. Automakers have announced plans to cancel most of those 10.

Meanwhile, those priced at $60,000 or higher have grown by 163% during the same period.

Jonathan Smoke, Cox Automotive’s chief economist, has said that last year’s Federal Reserve interest rate hikes kept some shoppers from buying cars: “This trend induces automakers to focus on profitable products for consumers who can afford to buy, which keeps less affluent consumers out of the new vehicle market altogether and limits what is available and possible in the used market for years to come.”

Dealers are pushing back, telling automakers they need more mainstream cars to sell, but correcting the problem will take time.

How to Buy a Car Right Now

New car prices remain more than $10,000 higher than five years ago, amid the COVID-19 pandemic. That’s when the average transaction price for new vehicles was around $38,400. However, with all the technological advances and offerings, your next car will likely last longer and help you drive safer than ever. 

RELATED: Buying Older, Used Cars in 2025

Vehicle quality studies repeatedly show that today’s new cars suffer fewer problems than those from just a few years earlier. Buyers of higher-priced used cars will likely see the vehicle driving on the road even longer. The same goes for those buying new ones.

With most automakers now building such durable cars, they compete by adding more high-tech features. Features like adaptive cruise control and Apple CarPlay are now more common than ever on entry-level vehicles. Read on to see our tips on buying a car below.

How to Leverage Incentives to Buy a New Car

Last month, car incentives comprised about 6.8% of the average deal, or about $3,300. To learn how to take advantage of incentives, read about our monthly best car deals to find dealer or manufacturer offers, including cash back and lower interest rates for financing your next vehicle.

RELATED: How to Buy a New Car in 10 Steps

Selling a Car Right Now

Few of us can sell a car without needing to buy a replacement. If you can sell now, what are you waiting for? You could get more for your vehicle if it’s in high demand, and that’s excellent news. The best way to get the most money for your used car is to sell it privately. But if you don’t want the hassle, there is still an opportunity to sell to a dealership.

PRO TIP: If selling a car, consider selling it peer-to-peer using Kelley Blue Book’s Private Seller Exchange marketplace. It’s a low-cost method that helps consumers earn more for their vehicle than selling to a dealership.

Trading in a Car Now

The ongoing shortage of used cars will be with us for years. As a result, you’ll likely still see respectable offers for your used car this month.

Searching for a decent price for your trade-in is still a good idea by shopping it around. Each dealership tries to keep a balance of vehicles on its lot. Sometimes, the one you want to buy from doesn’t need your trade-in desperately, but a competitor does.

Research your vehicle’s Kelley Blue Book value, then call several local dealerships to see what they’ll offer you for it. Or try our Instant Cash Offer tool, which brings the deal to you from various dealerships without obligation. You can choose your preferred offer or use it to negotiate with others.

Is Trading in Your Vehicle a Good Idea?

Possibly. You could get more money than usual if your vehicle is in high demand. It will help defray the costs of buying a new or used car. However, if your vehicle is not in high demand, you can expect to get close to Kelley Blue Book value. Use Kelley Blue Book’s car valuation tool to find out the price of your new or used car.

Can You Trade in a Vehicle That’s Not Paid Off?

Yes. Whether you have paid your car off or not, you can still trade it in. However, a car depreciates when you drive it out of the dealership. It’s best to take stock of how much equity you carry in the vehicle. Take the difference between the car’s current market value and what you owe to figure that out. Read our story on selling a car.

Looking Ahead

The remainder of this year is likely to be one of major disruptions to the car market. Tariffs could raise the prices of new vehicles further and impact used cars as buyers look to find less expensive models. Automakers and dealers will need to shift their practices to compensate. We could even see some cars canceled altogether if automakers find importing them at reasonable prices impossible.

That doesn’t necessarily mean you should rush out and buy while you can. Still, if you need a new car soon, it might make sense to act now while prices remain steady.

RELATED: 10 Best Used Car Deals

Tips for Buying a Vehicle Right Now

If you shop right now, we recommend a few strategies to help you find the right new or used car that fits your budget.

1. Expand your search. Widen your search to a broader geographic area because you could find a better deal or the used car you want outside your immediate area.
2. Stay patient. Call dealerships to see what’s in stock for those high-demand vehicles. Leave a refundable deposit if you want first dibs.
3. Buy a less expensive model. With higher car loan interest rates, consider buying a cheaper vehicle model instead of a more expensive one in the lineup you’re considering. Understand how much you can afford.
4. Look for deals. Make sure to research car deals to find what works best for you. It may involve contacting or visiting several dealerships as you search for the right fit.
5. Weigh your options. Don’t just look for a car; search for the best interest rates from banks or credit unions. Also, shop for your insurance rates ahead of the deal to know how much the higher auto insurance costs will be for your desired vehicle. Then, weigh all your options, including financing incentives and deals at the dealership, if that’s where you buy your next vehicle. Also, you may find that the prices of some newer-model used vehicles are almost the same as new cars. Just keep all your options open during your search.
6. Avoid dealer markups. If you see a markup (sometimes called a “market adjustment”) on your final invoice, ask the dealer to remove it. If they refuse, shop at another dealership. Markups were more prevalent during the COVID-19 pandemic. However, dealers still mark up some vehicles that are in short supply.
7. Question all add-ons. If your sales summary includes entries like “window tint,” “fabric protection,” “carpeted floor mats” and other add-ons you didn’t request, ask the dealer to remove those line items from your invoice. Many dealers tack on these extras to make quick profits.

It may make sense to keep your existing car for another year or two. If you must buy, be prepared to take excellent care of your next car to keep it running for a long time.

Editor’s Note: This article has been updated since it was published.