2025 forecasted to be the strongest year for new car sales in half a decade — Cox Auto

The new year kicked off with Cox Automotive forecasting a mostly optimistic 12-month road ahead for the automotive business – building on the momentum of 2024 and consumer sentiment improving.

The details: Cox Automotive’s outlook – drawn from its industry insights team – sees the car business growing by 2.6% in 2025, driven by improved affordability dynamics, positive sales trends, and improved buyer satisfaction.

• Factors like declining loan rates and growing incentives will help to address vehicle affordability concerns. There’s also a possibility that interest rates will be lowered another full point by spring.

• New vehicle sales are expected to reach 16.3 million units in 2025, an increase of 3% from 2024 and the best sales year for the market in five years. Used retail sales are expected to reach 20.1 million in 2025, its best year since 2021.

• Cox Automotive data reveals that 72% of new vehicle buyers rated their experience at the dealership as “better than expected.”

The EV factor: Despite challenges in the EV market, Cox Automotive expects electric vehicles to play a bigger role in driving the market next year, with ICE vehicles falling to 75% of total volume, the lowest level to date. The growth is attributed to several factors, most notably improving charging infrastructure.

Easing affordability: Automakers are expected to further ramp up incentives, which have been steadily increasing as inventory levels improve. These incentives, coupled with lower interest rates, are likely to make new vehicles more accessible for price-conscious buyers. Analysts also point to a somewhat stabilizing job market as additional some tailwinds for consumer affordability.

Between the lines: Cox Automotive also highlights a few areas of uncertainty that could impact the automotive business next year and beyond.

• The elimination of tax credits for EVs, which has been part of the appeal of electric vehicles for many buyers, could have a huge impact on sales.

• Tariffs and “drastic immigration policies” could also impact the automotive business.

• After the spring (when interest rates could potentially be lowered), the rates could start rising again, leading some buyers to delay purchasing a vehicle.

Bottom line: 2025 is shaping up to be a pivotal year, with dealers, automakers, and consumers more aligned in ways not seen since 2019.

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