On the Dash:
- Vehicle affordability remains tight, prompting most buyers to opt for used cars priced under $30,000.
- Luxury sales between $70,000 and $90,000 remain strong, though tariffs may slow demand.
- EV growth surged before tax credit expirations, while hybrids continue to drive long-term momentum.
Vehicle affordability continues to be a significant challenge in 2025, according to CarGurus’ Q3 quarterly review. Despite household incomes stagnating when adjusted for inflation, vehicle prices remain well above pre-pandemic levels. This ongoing gap influences how Americans purchase, finance, and select vehicles, affecting both the new and used markets.
Even with these pressures, overall vehicle sales remain steady, as new light-vehicle volumes have increased due to recent policy and tariff changes. Meanwhile, the used vehicle market experiences stable demand driven by a stronger value per dollar. However, there are few new models priced below $30,000, which limits options for cost-conscious buyers. The growth in the used market is primarily concentrated in the sub-$30,000 segment, closely aligned with consumer affordability.
Used vehicle market drives growth
Nearly three-quarters of the growth in used retail sales this year came from vehicles priced under $30,000, with most of these being older models. In September, about half of the listings in this price range were at least seven years old, usually priced around $13,600. Many buyers are increasingly willing to purchase higher-mileage vehicles, often 2014 models with six-figure odometers, to keep monthly payments manageable.
At the lower end of the market, vehicles priced under $10,000 have shown strong year-over-year growth. This segment is led by practical models such as the Ford Escape, Jeep Cherokee, and Nissan Rogue, which average 125,000 miles and sell in roughly 40 days. Vehicles priced between $10,000 and $20,000 performed even better, as shoppers found slightly newer, lower-mileage options that fit their budgets. Popular vehicles in this range include the Jeep Wrangler, Ford F-150, and Honda CR-V, which typically turn over in the low-to-mid 30-day window. Notably, dealers focusing on quality reconditioning, transparent histories, and clear feature listings are experiencing quicker sales in this segment.
Geography also influences affordability, with coastal states like California, Florida, Texas, and Virginia holding some of the highest concentrations of used vehicles priced under $20,000. These listings account for approximately 35-40% of the total supply, highlighting the importance of localized inventory acquisition and marketing strategies.
Luxury market holds steady
While affordability defines one end of the market, luxury sales continue to climb. Nearly half of the new car sales growth year-over-year occurred in the $70,000 to $90,000 price band, with additional strength above $120,000. Automakers have responded by increasing supply in these upper tiers, particularly between $80,000 and $90,000.
Notably, luxury demand may face pressure from rising tariffs. By early fall, nearly 40% of luxury listings were already 2026 models, priced approximately 6% higher than comparable 2025 models. Consumers have thus far absorbed these increases, but further cost increases related to tariffs may test demand heading into 2025.
EV outlook
Moreover, EVs have reached a pivotal turning point, with the expiration of federal EV tax credits at the end of September triggering a 53% quarter-over-quarter surge in new EV sales as buyers rushed to purchase before the deadline. Used EV sales also rose by 16% for qualifying vehicles priced at or below the $25,000 cap. However, the outlook remains uncertain, especially since California, which accounts for about 30% of 2024 battery electric vehicle (BEV) sales, will not replace the federal incentive. Analysts now predict a double-digit decline in EV sales in the fourth quarter, although the exact extent of this decline remains unclear.
Looking ahead, affordability is expected to remain a defining constraint for U.S. auto sales. As more consumers find themselves priced out of the new vehicle market, dealers may need to rely more on older used inventory and enhance parts and service operations to maintain margins and retain customers.
