Quick Facts About New Car Prices
- Cox Automotive’s Erin Keating said she expects a 5% increase in the prices of vehicles not subject to the full 25% tariff, and new vehicles directly impacted by the 25% tariff would see price increases of between 10% and 15%.
- New car average transaction prices held steady in May but are up slightly from last year. Prices are more than $10,000 higher than five years ago.
- Shoppers could find great deals on electric cars and overstocked new cars from brands like Jaguar, Audi, Land Rover, and Hyundai. Some shoppers may see average car-buying incentives of about $3,300.
If you’re in the market for a new vehicle, don’t wait. A perfect storm of shrinking inventory, reduced incentives, and new tariffs is poised to drive up car prices. Tariffs of 25% on auto imports took effect just as the spring buying season began. While the White House has eased restrictions on some tariffs, including temporarily on car parts, the broader impact on global supply chains is already being felt. Shipping volumes decreased at ports, and some manufacturers stalled or pulled back production.
Although automakers like Hyundai held prices steady through early June, others like Ford have already begun raising prices on models built in Mexico. The days of post-pandemic price drops may be over. Shoppers are now facing a market stuck in neutral, and wondering when relief will come.
Read on for expert insights into what’s driving the current pricing pressure and what you need to know if you’re planning to start your search or buy a car now.
- New Car Prices Holding Steady
- New Car Inventory Update
- Market Uncertainty: Shoppers Delay New Car Purchases
- Shop Around for the Best Offer on Your Trade-in
- The Higher Costs of Car Insurance
- What to Expect: Looking Ahead
New Car Prices Holding Steady
Kelley Blue Book data show average transaction prices were $48,799 in May, about the same as a month earlier, and slightly higher than last year, at about 1%. Incentives to attract shoppers to new vehicles were 6.8%, or nearly $3,300. That’s about the same as last year, though the incentives were down from 8% earlier this year.
RELATED: Tracking Car Prices During Tariffs
Overall, average transaction prices are more than $10,400 higher than in May 2020, just as the COVID-19 pandemic gripped the nation. At that time, the average transaction price for new vehicles was about $38,400.
Car Prices Expected to Increase
Cox Automotive executive analyst Erin Keating predicts prices could soon rise in the coming months.
“While tariff policy is adding uncertainty to the new-vehicle market, prices are holding remarkably steady, a reminder that auto industry change is often slow,” said Keating. “Many automakers are keeping true to a promise to hold the line on pricing, at least in the near term. We are still expecting prices to move higher through the summer, as the inflationary impact of tariffs begins to hit. Right now, we believe dealer profitability is being squeezed, as costs on many products are going up, but raising retail prices in this environment is a real challenge.”
Cox Automotive is the parent company of Kelley Blue Book.
The volume-weighted average transaction calculation reflects all the car market realities, including high-volume vehicles, like pricey pickup trucks, influencing the number. For example, the report shows that full-sized pickups posted an average transaction price of about $64,700.
Additionally, electric vehicle affordability improved. In May, consumers paid an average transaction price of an estimated $57,734. The nation’s largest electric vehicle (EV) seller, Tesla, saw average transaction prices decrease by an estimated 2.8% year over year to $55,277.
What Drives New Car Prices
- Inventory availability
- Manufacturer incentives
- Dealer discounts
- Trade-in vehicle value
New Car Inventory Update
Dealerships track the amount of new vehicles they have on hand to sell using a metric called “days of inventory,” or how long it would take them to sell out at today’s sales pace if they stopped adding new vehicles.
Inventory remained stable throughout May, and as June began. According to the Cox Automotive’s vAuto Live Market View, tariffs triggered a surge of car sales in March and early April, before tapering off in May. Car dealerships maintained inventory and started June with a larger 70-day supply, compared with May. Still, that’s down 12% from a year ago. While you’re likely to find plenty of vehicles from Jaguar, Audi, Land Rover, and Hyundai, you’re less likely to find the exact model you may want from Toyota, Lexus, Honda, and BMW.
Our experts say that inventory is not replenished as fast when car dealers sell it down. Some automakers have delayed deliveries and halted production in the past several months as they grappled with new tariff policies.
Market Uncertainty: Shoppers Cautious About Buying
Amid the tariffs on imported cars, the new-car landscape has dramatically shifted from buyer frenzy to caution in the last several months.
We’ve seen production and shipping delivery disruptions with reports of paused shipments and auto production lines, temporary layoffs, and even a canceled car. Volkswagen reportedly will add a tariff “import fee” as a line item on window stickers. Meanwhile, Hyundai and Genesis chose not to raise prices until after June 2. Additionally, 2026 Hyundai models will no longer come with complimentary maintenance of three years or 36,000 miles. Other news reports show Ford sent a notice to dealers about increasing prices up to $2,000 on Mexico-produced vehicles like the Mach-E, Bronco Sport, and its least expensive pickup, the Maverick.
RELATED: Number of Cars Shipped to U.S. Plunges More Than 70%
Shoppers heading out to purchase a new vehicle should monitor dealership pricing. While carmakers set the stage for pricing, dealers ultimately close deals. They could easily add markups or dealer fees to compensate for any losses they could incur due to tariffs along the way.
Cox Automotive data suggest the top five impacted vehicle models based on 2024 sales volume and exposure to tariffs are:
- Subaru Forester
- Honda HR-V
- Honda CR-V
- Chevrolet Trax
- Chevrolet Equinox
For now, new car buyers should search for incentives and cash-back deals and expand their shopping boundaries, if needed, to find the right deal for their budget. Qualified buyers with stellar credit will discover low-interest-rate offers and lease deals, including on new electric vehicle models left over from 2024.
Credit-worthy buyers can secure deals on last year’s EV models, like a 2024 Honda Prologue with 0% APR financing and $1,000 cash back for up to 72 months, good through July 7.
Shop Around for the Best Offer on Your Trade-in
Trade-in value is another factor driving car prices. A lack of used vehicle stock has kept those prices higher, giving credence to the idea that buying a new vehicle might be cheaper than purchasing a certain used model, only a few years old. As a result, it’s still a great time to trade in your car.
Dealers value your trade-in partly based on what they need in stock. On the flip side, they’re more likely to offer an excellent deal to buyers on a car that fewer people are looking for currently. In other words, a car shopper trading a 2018 Honda Civic for something else will be much happier with the trade-in appraisal than one with a 2021 Jeep Grand Cherokee.
Car buyers should prepare to shop their trade-in around. It’s slightly more complicated to pull off, but selling your old vehicle to one dealership and buying your new car from a different one may make sense if the final invoice numbers work out in your favor. Use the Kelley Blue Book Instant Cash Offer tool to shop your trade-in vehicle at nearby dealerships. When you let the deals come to you, selecting the best trade-in offer for your situation is easier. Remember, you can always negotiate the offer, and pitting one offer against the other is not unheard of.
The Higher Costs of Car Insurance
With tariffs on imported cars and some car parts, it’s likely auto insurance rates will climb higher, even as car owners are already stretched to their limits on insurance costs. According to the Bureau of Labor Statistics, car insurance costs were 7% higher in May than a year earlier. Bankrate says car insurance averages about $2,680 a year for full coverage. Full coverage, called comprehensive car insurance, covers natural disasters like wildfires, hurricanes, and accidents. Before you seal the deal and sign anything for a new vehicle, compare quotes for car insurance.
What to Expect: Looking Ahead
There’s so much to digest here, and it’s hard to know what to expect exactly, except for a chaotic future for car buying. Economists initially forecast two interest rate cuts in 2025, after three last year. However, it’s anyone’s guess what could come, or nothing at all could happen. At the Federal Reserve meeting in May, the nation’s central bank held rates steady.
What to Do If You Need a Car Now
For now, shop for your next car before prices increase. Manufacturers and dealers may raise prices as inventory tightens. Before buying:
- Research your options and expand your boundaries if needed.
- Look for deals, especially on 2025 models as 2026 vehicles start pouring in.
- Shop ahead for a car loan if you’re not paying cash.
RELATED: Paying Cash for a Car in 2025: Consider the Pros and Cons
Editor’s Note: This article has been updated for accuracy since it was initially published.
