As 2024 rapidly comes to a close, many are looking forward to 2025 and the predictions for the automotive industry. One of the forecasts industry professionals anticipate the most comes from Jonathan Smoke, Cox Automotive’s chief economist. In today’s episode of Inside Automotive, Sr. Director of Strategic Development from Autotrader and Kelley Blue Book, Jade Terreberry, reviews the five key predictions for the 2025 automotive industry and the critical actions dealers must take to ensure success and profitability.
Market growth is on the horizon
Smoke predicts market growth in 2025. With the election finally over, consumer confidence has risen. Consumers who were previously hesitant to make purchases are “getting off the fence,” unleashing pent-up demand and sparking a significant surge in vehicle purchases.
Terreberry notes that post-election years have historically tracked high consumer sentiment. She urges dealers to get off the fence because customers are buying now.
Dealers who effectively leverage data and analytics, competitively price their vehicles, and talk to consumers about incentives will come out on top.
Vehicle affordability will improve but remains a challenge
While vehicle affordability has remained a challenge throughout the year, Smoke predicts it will improve narrowly in 2025. This slight improvement can be attributed to the Fed rate cuts, average household wage growth, and an uptick in new vehicle inventories. Despite these improvements, affordability will remain a challenge in the new year due to increasing insurance rates–mainly due to the multiple natural disasters that struck the U.S.– and the ballooning of new vehicle prices, which have jumped nearly 25% in the past five years.
In addition, Terreberry highlights that consumers’ definitions of affordability are changing slightly. They are shifting their focus from sticker price to value and long-term benefits. Approximately 62% of consumers will invest in a vehicle that enhances their quality of life.
Terreberry recommends dealers position themselves as consultants, shifting the focus away from price and toward value and helping the customer choose the right vehicle to suit their unique lifestyle. It’s critical to understand affordability concerns and then actively combat them by providing customers with solutions such as trade-in incentives and advising them to use their tax return for a downpayment. Find the deal in every deal and frame the conversation around incentives with urgency to close the sale effectively.
Sales growth will remain slow yet collectively positive
According to Smoke, he anticipates that 2025 will be an excellent year, with slow but steady sales growth with the new-vehicle, retail used-vehicle, and wholesale segments projected to see growth. The certified pre-owned (CPO) segment is expected to struggle due to insufficient inventory. Otherwise, the outlook is bright for most segments.
It’s essential to keep in mind that many consumers prefer to buy certified pre-owned, and she advises dealers to take a look at their CPO practices to ensure that they are meeting customers’ needs in this area.
The U.S. EV market will continue to grow
Although growth has been slower in the EV market than initially anticipated, Smoke predicts that electric vehicle (EV) adoption will accelerate in 2025. Cox Automotive predicts that every 1-in-4 vehicles sold in 2025 will be electric.
Government-supported incentives, anticipated expansion of the charging infrastructure, and an expansion in various models at different price points have driven this surge in EV demand.
Terreberry encourages dealers to be champions of EVs and accept that they aren’t going away anytime soon. Consumers interested in purchasing EVs will do so, and salespeople need to invest in their EV education to present themselves to customers as experts.
Customer satisfaction will continue to rise
Cox Automotive found that customer satisfaction with the vehicle purchasing process–particularly for new cars–is at an all-time high, and Smoke predicts that this momentum will continue into 2025.
This momentum is driven by omni-channel experiences and technological advancements that allow consumers to pick up where they left off quickly, regardless of where they are in the ecosystem. This customer-first, seamless online-to-offline shopping journey drives customer satisfaction and will only continue with the refinement of technology and AI-powered tools.
Terreberry recommends that dealers take the time to explore their options and adopt this game-changing technology into the dealership to streamline operations and improve the customer purchasing journey. Dealers who blend technology with human-centric service will distinguish themselves as industry leaders.
Terreberry concludes with an essential piece of advice. If dealers want to R.O.C.K. in 2025, they should focus on four key areas: consistently measuring their ROI, improving operational efficiency, delivering an exceptional consumer experience, and keeping their existing assets—including staff, customers, and market share.
By focusing on these guiding fundamentals, dealerships will set themselves up for success and turn 2025 into their best year yet.
"Recognize that anybody showing up on a dealership lot is there to buy. There aren't a lot of "shoppers" in the marketplace right now. There are buyers." – Jade Terreberry
