Quick Facts About the Buying and Selling Marketplace
- Tariffs have begun raising car MSRPs, but actual transaction prices are holding mostly stable.
- Both new and used car prices changed little in June.
- Tariffs will radically change prices in the coming months.
When tariffs on new cars and car parts were announced this spring, many economists predicted that sharp price increases would follow. But they’d take time to show up for the average car shopper.
That’s exactly what has happened. If you go car shopping in midsummer, you’re likely to encounter nervous dealers doing their best to keep prices close to what they were a few months ago. MSRPs are rising. Actual transaction prices are as well, but much slower.
Price increases are also unevenly distributed. Some automakers still have a hefty supply of cars imported at pre-tariff prices, while others are essentially selling tariffed cars now.
Car shoppers heading to sales lots could see the last vestiges of a good market. It won’t last, and it may take research to find exactly what you want to buy.
We never advise anyone to rush into an expensive purchase that, for many, involves taking on years of debt. If you’re on the fence about shopping this year, you might still want to batten down the hatches and ride out the chaos in your existing car.
We’ll explain what to expect when buying a new or used car, or selling or trading one in, and why it might make sense to act quickly.
- What New Car Shoppers Can Expect
- Each Automaker Responding Differently
- What Used Car Shoppers Can Expect
- Older, Less Expensive Cars Harder to Find
- Automakers Are Building More Expensive Cars
- How to Buy a Car Right Now
- Selling a Car Right Now
- Trading in a Car Right Now
- Looking Ahead
- Tips for Buying a Vehicle Right Now
What New Car Shoppers Can Expect
The final price shoppers pay is staying fairly steady, but the price on the window sticker is on the way up. The average manufacturer’s suggested retail price (MSRP) hit $51,124 last month, nearing a new record.
That discrepancy is a warning sign. It means costs are going up at the factory, but dealers are using heavier discounts to keep price increases from driving buyers away. They can do that … for a while. It gets harder as time goes on.
Most dealers try to keep about two months’ worth of cars in stock. Some have more, and some have less. Tariffs mean the age of their inventory is a critical factor in the price you pay.
Some dealers are now mostly selling cars built or imported at post-tariff prices. Others still have cars built or shipped to the country at pre-tariff prices.
RELATED: When Will New Car Prices Drop?
Your competition also influences prices. The sales rate dropped in June, meaning some dealers will likely offer heavier incentives to lure in more shoppers.
Each Automaker Responding Differently
Car pricing is complicated, and each automaker has responded to tariffs differently. As long as the tariffs remain in place, their responses are likely to shift constantly.
Some, like Hyundai and Mercedes-Benz, have pledged not to raise prices for now. Others are deciding on a case-by-case basis. Ford raised prices on its Maverick pickup, Bronco Sport SUV, and Mustang Mach-E electric SUV to compensate, but kept most prices stable.
RELATED: How Each Automaker is Responding to Tariffs
Automakers can absorb some of the cost of tariffs for a while. They might even respond by raising one car’s price to help pay the tariff on another.
With so much constantly shifting, your best tool for understanding local price changes is the Kelley Blue Book Fair Purchase Price, which we calculate using recent transactions for that car in your area. We update each Fair Purchase Price weekly, showing you how tariffs and tariff anxiety are impacting the prices of the specific vehicles you’re shopping where you live.
The Fed Continues to Pause Interest Rate Cuts
Prices are all that cash buyers need to worry about. However, few car shoppers are cash buyers. Most Americans borrow money to buy a new car.
That grew easier in June. Lenders approved more loans, even for those with subprime credit. They also accepted lower down payments and extended more loans with terms longer than 72 months (a move that can lower your monthly payment but keep you in debt longer).
The Federal Reserve, commonly called “the Fed,” sets the federal funds rate, the interest rate banks use when they lend each other money. The federal funds rate determines interest rates for every type of loan, including car loans. It’s still on the way down, which should ripple through the economy over the next few months.
Due to economic uncertainty, the Fed has kept rates steady in recent months. At its June meeting, the Fed did the same and held rates. Even expert analysts don’t know when to expect the next rate change. The central bank tends to provide a prediction of its future decisions, but it declined to release the predictive “dot plot” this time.
The credit climate may not be able to improve much more with such uncertainty.
What Used Car Shoppers Can Expect
The news for used car shoppers is encouraging in midsummer.
New car prices rose by $190 in June. Used car prices rose even less. The average used car buyer paid $25,512 — just $71 more than the month before.
The nationwide supply of used cars has been thin for years. Pandemic-era disruptions meant automakers built about 8 million fewer cars than they normally would have in 2021 and 2022. Millions of cars will never reach the used market, keeping supplies low for a long time.
Strangely, tariffs gave them a little relief. When tariffs were first announced, Americans rushed to buy new cars at pre-tariff prices. That flood of buyers also traded in many cars, helping used car dealers build up their inventories. That has helped keep prices stable.
We can predict trends in used car prices by watching the wholesale prices dealers pay for used cars at auction. A trend in wholesale prices tends to become a trend in retail prices after about six to eight weeks. Wholesale prices increased in June.
Older, Less Expensive Cars Harder to Find
If you hope to find an older vehicle and your budget is less than $15,000, these cars remain in short supply. Dealers have just 32 days’ worth of used cars priced under $15,000 — 13 days below the overall industry average.
However, the tariff threat could push used car prices higher. When new car prices rise, would-be new-car shoppers head to used lots looking for something still in their price range. More would-be new car shoppers start buying up the available used vehicles, drawing down the inventory. Plus, Americans are holding onto their cars longer than ever. The average vehicle on American roads is 12.6 years old. Automakers also produced fewer cars for several years after the 2008 recession, leaving fewer higher-mileage, older used vehicles available to sell.
The most accessible used cars carry prices between $15,000 and $30,000.
Automakers Build More Expensive Cars
If you haven’t been car shopping in a while, the cars on offer may surprise you.
In recent years, inexpensive cars have grown scarce. Recent analysis finds that sales of vehicles priced at $25,000 or less have fallen by 78% in just five years. Six years ago, automakers offered 36 new models in that price range. By late 2023, that number was just 10. Automakers have announced plans to cancel most of those 10, including the Mitsubishi Mirage.
Meanwhile, those priced at $60,000 or higher have grown by 163% during the same period.
Dealers are pushing back, telling automakers they need more mainstream cars to sell, but correcting the problem will take time.
How to Buy a Car Right Now
New car prices remain about $10,000 higher than five years ago, amid the COVID-19 pandemic. That’s when the average transaction price for new vehicles was around $38,900. However, with all the technological advances and offerings, your next car will likely last longer and help you drive safer than ever.
RELATED: Buying Older, Used Cars in 2025
Vehicle quality studies repeatedly show that today’s new cars suffer fewer problems than those from just a few years earlier. Buyers of higher-priced used cars will likely see the vehicle driving on the road even longer. The same goes for those buying new ones.
With most automakers now building such durable cars, they compete by adding more high-tech features. Features like adaptive cruise control and Apple CarPlay are now more common than ever on entry-level vehicles. Read on to see our tips on buying a car below.
How to Leverage Incentives to Buy a New Car
Last month, car incentives comprised about 6.9% of the average deal, or about $3,400. To learn how to take advantage of incentives, read about our monthly best car deals to find dealer or manufacturer offers, including cash back and lower interest rates for financing your next vehicle.
RELATED: How to Buy a New Car in 10 Steps
Selling a Car Right Now
Few of us can sell a car without needing to buy a replacement. If you can sell now, what are you waiting for? You could get more for your vehicle if it’s in high demand, and that’s excellent news. The best way to get the most money for your used car is to sell it privately. But if you don’t want the hassle, there is still an opportunity to sell to a dealership.
PRO TIP: If selling a car, consider selling it peer-to-peer using Kelley Blue Book’s Private Seller Exchange marketplace. It’s a low-cost method that helps consumers earn more for their vehicle than selling to a dealership.
Trading in a Car Now
The ongoing shortage of used cars will be with us for years. As a result, you’ll likely still see respectable offers for your used car this month.
Searching for a decent price for your trade-in is still a good idea by shopping around. Each dealership tries to keep a balance of vehicles on its lot. Sometimes, the one you want to buy from doesn’t need your trade-in desperately, but a competitor does.
Research your vehicle’s Kelley Blue Book value, then call several local dealerships to see what they’ll offer you for it. Or try our Instant Cash Offer tool, which brings the deal to you from various dealerships without obligation. You can choose your preferred offer or use it to negotiate with others.
Is Trading in Your Vehicle a Good Idea?
Possibly. You could get more money than usual if your vehicle is in high demand. It will help defray the costs of buying a new or used car. However, if your vehicle is not in high demand, you can expect to get close to Kelley Blue Book value. Use Kelley Blue Book’s car valuation tool to find out the price of your new or used car.
Can You Trade in a Vehicle That’s Not Paid Off?
Yes. Whether you have paid your car off or not, you can still trade it in. However, a car depreciates when you drive it out of the dealership. It’s best to take stock of how much equity you carry in the vehicle. Take the difference between the car’s current market value and what you owe to figure that out. Read our story on selling a car.
Looking Ahead
The remainder of this year is likely to be one of major disruptions to the car market. Tariffs could raise the prices of new vehicles further and impact used cars as buyers look to find less expensive models. Automakers and dealers will need to shift their practices to compensate. We could even see some cars canceled altogether if automakers find it impossible to import them at reasonable prices.
That doesn’t necessarily mean you should rush out and buy while you can. Still, if you need a new car soon, it might make sense to act now while prices remain steady.
RELATED: 10 Best Used Car Deals
Tips for Buying a Vehicle Right Now
If you shop right now, we recommend a few strategies to help you find the right new or used car that fits your budget.
- Expand your search. Widen your search to a broader geographic area because you could find a better deal or the used car you want outside your immediate area.
- Stay patient. Call dealerships to see what’s in stock for those high-demand vehicles. Leave a refundable deposit if you want first dibs.
- Buy a less expensive model. With higher car loan interest rates, consider buying a cheaper vehicle model instead of a more expensive one in the lineup you’re considering. Understand how much you can afford.
- Look for deals. Make sure to research car deals to find what works best for you. It may involve contacting or visiting several dealerships as you search for the right fit.
- Weigh your options. Don’t just look for a car; search for the best interest rates from banks or credit unions. Also, shop for your insurance rates ahead of the deal to know how much the higher auto insurance costs will be for your desired vehicle. Then, weigh all your options, including financing incentives and deals at the dealership, if that’s where you buy your next vehicle. Also, you may find that the prices of some newer-model used vehicles are almost the same as new cars. Just keep all your options open during your search.
- Avoid dealer markups. If you see a markup (sometimes called a “market adjustment”) on your final invoice, ask the dealer to remove it. If they refuse, shop at another dealership. Markups were more prevalent during the COVID-19 pandemic. However, dealers still mark up some vehicles that are in short supply.
- Question all add-ons. If your sales summary includes entries like “window tint,” “fabric protection,” “carpeted floor mats,” and other add-ons you didn’t request, ask the dealer to remove those line items from your invoice. Many dealers tack on these extras to make quick profits.
It may make more sense to keep your existing car for another year or two. If you must buy, be prepared to take excellent care of your next car to keep it running for a long time.
Editor’s Note: This article has been updated since it was published.
