As the automotive industry enters the final quarter of 2025, dealers face a complex mix of softening sales volumes, rising vehicle prices, and shifting consumer behavior. On today’s episode of CBT Now, we’re joined by Kevin Tynan, the director of research at The Presidio Group, who breaks down Q3 trends, the impact of expiring EV tax credits, and what dealers can expect heading into 2026.
To start, Tynan notes that tariff-driven pent-up demand earlier this year created temporary sales spikes, but much of that has since eased. Consumers are now showing resistance to record-high vehicle pricing, forcing wider discounts and raising new affordability concerns.
“The gap between MSRP and transaction price is getting wider. It’s over $2,000 again, which is about 4% and that’s the highest since before the pandemic.” Tynan said.
Additionally, new vehicle MSRP has exceeded $51,000 for most of the year and could climb further if automakers pass along previously absorbed tariff costs. Tynan argues that these price increases are not fully justified by technological improvements, leaving buyers reluctant to upgrade
Buyers are holding onto vehicles longer, with the average age now exceeding 12 years. Without compelling technological upgrades or affordable options, consumers are reluctant to replace them.
EV uncertainty
Electric vehicles continue to face uneven demand. EVs accounted for 12% of sales last month, spurred by the expiration of federal tax credits. Tynan cautions that demand may soften without those incentives, leaving automakers to absorb losses. While some OEMs have already canceled EV platforms early in their life cycles, leasing and lower-priced models, Tynan said, may reshape the market in 2026.
In the used-vehicle sector, CarMax’s recent earnings miss and stock drop of more than 30% underscored the pressure facing independents. As new-vehicle margins tighten, franchise dealers are increasingly focusing on used cars, intensifying competition with CarMax and Carvana.
Then, Tynan pointed to a broader affordability problem across the industry. Prices have climbed without comparable improvements in value, and consumers no longer see justification for higher MSRPs. With EV adoption struggling and no clear next catalyst, automakers face uncertainty in defining future growth.
Q4 outlook
Ultimately, last year’s fourth quarter saw consumers purchasing an unusually high number of vehicles, with sales reaching 16 million units in October, 16.5 million in November, and 16.8 million in December. These figures are unlikely to be matched in 2025. For now, Tynan asserts, automakers and dealers expect affordability-driven incentives, particularly leasing options, to play a growing role in keeping buyers engaged.
