Auto ECON Updates

Auto ECON Updates (380)

Used vehicle inventory increased again in May, up 4.4% year-over-year (YoY) and marking the highest point in nearly four years, according to CarGurus. Inventory rose 3.4% month-over-month following a moderation in demand after the early-spring sales rush. As availability improves, dealer lots now offer consumers some of the broadest selection in recent memory.

Despite rising inventories, used demand remains notably resilient. The CarGurus Used Vehicle Demand Index climbed up by 4.4%, marking the strongest May performance since the record levels seen during the 2021 buying frenzy. Average days-on-market fell by 6% compared to last year, driven largely by higher vehicle turnover.

Average used vehicle prices stayed notably stable at $28,721, a modest 0.6% increase YoY. Market Days’ Supply remained steady at 45.7 days, up slightly from this time last year (+2.1% YoY), signaling balanced supply and consistent buyer interest.

Average marketed prices for both Used and Certified Used vehicles rose from late April to late May, according to ZeroSum’s June 2025 “State of the Dealer” report.

Used jumped by $800 to $26,400 month-over-month, while Certified rose by $1,030 to $38,000 when comparing April 30 to May 31. Used and Certified Used vehicles remain well below New vehicle prices and will play a crucial role in dealership profitability, as tariffs will likely raise New vehicle prices over the next several months.

“The Used vehicle sector is continuing to benefit from the turbulence in the New vehicle marketplace,” said Josh Stoll, vice president of dealer success at ZeroSum. “And with many of the OEMs ending their pricing programs and New prices starting to go up, Used vehicles will become an even more important safe haven for buyers. Dealers should take a very close look at their inventory positions and pricing strategies compared to their competitors to maximize their sales and the profitability of these vehicles.”

Auto dealers continue to see strong pull-ahead sales, as many shoppers are making vehicle purchases in anticipation of looming tariff-driven new vehicle price increases. To date, an estimated 460,000 sales since Feb. 24 have been pull-ahead. The rate of pull-ahead sales is slowing, however, with an estimated 120,000 units in May compared to an average of 170,000 units in March and April.

Discounts and incentives being marketed to consumers averaged $2,065 over the month of May, up from $1,891 in April. At the end of the month, however, average promoted retail discounts and incentives were $265 less aggressive than the last day of April—another indication that pricing is beginning to move up as OEM discount programs come to an end.

Black Book, a division of Hearst that provides used vehicle valuations and residual value forecast solutions, released its Used Vehicle Retention Index for May 2025.The seasonally adjusted Index increased 0.1% (0.1 points) to 149.4 from April 2025 (149.3), which is 0.5% above where it was at the same time in 2024. 

“The market exceeded traditional seasonal expectations once again last month, with the Index reporting another increase from the previous month,” stated Laura Wehunt, vice president of data & analytics. “Speculation about the impact of tariffs created a frenzy among used market buyers in April and May, but buying activity began to taper off by the end of the month. As we move into June, the market appears to be stabilizing, aligning with more typical seasonal patterns.” 

NIADA delivered a request to Senate Finance Committee leadership for language clarifying the proposed tax deduction for interest paid on car loans as it applies to used vehicles.

NIADA supports the tax provision in H.R. 1, the “One Big, Beautiful Bill Act,” allowing for qualified borrowers to deduct the interest paid on auto loans up to $10,000 for tax years 2025 through 2028, provided that the financed vehicle is manufactured in the United States.

The House of Representatives passed the budget bill last week with the tax bill. The Senate will now take up consideration of the legislation.

The NIADA drafted the following letter to Senate Finance Committee Chairman Mike Crapo and Ranking Member Ron Wyden:

 “Dear Chairman Crapo and Ranking Member Wyden:

On behalf of the National Independent Automobile Dealers Association (NIADA) and its over 13,000 members nationwide, I respectfully request an important clarification regarding a tax provision included in H.R. 1, the “One Big, Beautiful Bill Act” (OBBBA), which was approved by the House of Representatives on May 22, 2025.  The OBBBA contains a series of important tax relief measures designed to stimulate the economy and improve the lives of hardworking Americans. One such provision allows for qualified borrowers to deduct the interest paid on auto loans up to $10,000 for tax years 2025 through 2028, provided that the financed vehicle is manufactured in the United States. 

NIADA strongly supports this provision, and we encourage you to include a similar provision in the Senate’s version of the OBBBA as you proceed with Committee and floor consideration.  However, despite being well-intentioned, we believe the current language is inadvertently limiting. While NIADA and other stakeholders in the automotive industry interpret the implicit objective of this provision as applying to both new and used vehicle sales, the language itself is silent on that important distinction. Explicitly clarifying the applicability of this provision in the Senate’s legislative text will bring much-needed certitude to the used automobile industry and the customers it serves. 

Demand for used automobiles has been steadily increasing over the past several years. This is partly due to supply chain concerns arising from the 2020 global pandemic, as well as the high cost of purchasing a new vehicle in today’s automotive market. NIADA members are committed to providing their customers with reliable vehicles at competitive prices and fair terms. Many of these customers come from modest means. Their vehicle is a financial lifeline. It provides safe transportation to and from work and enables them to manage their households and other personal commitments. By clarifying the provision, they can avail themselves of this modest tax deduction to help offset some of the costs associated with purchasing the vehicle and reallocate those funds to meet the myriad of demands occupying their lives. As consumers, this means redistributing those savings into local commerce and fostering economic growth, which is one of the OBBBA’s overarching objectives.    

NIADA is ready to work with you and your staff to provide clear and concise language to ensure this important deduction does not unintentionally limit meaningful tax relief for a substantial and active segment of the automotive marketplace.”

The letter was signed by Patrick O’Brien NIADA director of government affairs and compliance.

With volume for the month projected at 1.47 million units, May 2025 U.S. auto sales are estimated to translate to an estimated sales pace of 15.7 million units (seasonally adjusted annual rate: SAAR), according to S&P Global Mobility. The SAAR reading will be an expected and definitive step down from the 17.6-million-unit average over the March to April period. With one more selling day than both the year-ago and month prior periods, May 2025 volume is expected to be up 2% from the May 2024 level and up fractionally from the April 2025 result.

“Given the swirling tariff, consumer and auto inventory conditions, the expected May 2025 auto sales result will likely be the last period this year to post positive growth in year-ago and month-prior comparisons,” said Chris Hopson, principal analyst at S&P Global Mobility. “The strong sales surges in March and April, followed by the moderate May result, reduced some inventory levels. Shifting tariff policies have automakers scrambling to produce vehicles while they can, but uncertainty abounds in the immediate term and upcoming monthly sales levels are expected to decelerate further.”

Continued development of battery-electric vehicle (BEV) sales remains an assumption in the longer term S&P Global Mobility light vehicle sales forecast, although an unsettled regulatory and incentive policy environment has raised the potential that future growth levels will be more mild. In the immediate term, month-to-month volatility is anticipated. BEV share fell to an estimated 7.0% in both March and April, and while some of the lower share could be attributed to strong non-BEV demand, BEV growth is moderating. May BEV share is expected to reach a similar 6.8% share, reflective of the uneasiness as automakers, dealers and consumers continue to digest potential changes to BEV incentives. 

Although the total volume of defective products recalled from five key industries surged by 25% in Q1 2025, automotive recalls dropped.

According to Sedgwick brand protection’s latest U.S. Product Safety and Recall Index report provides a comprehensive analysis of recall data from the automotive, consumer product, food and drink, pharmaceutical, and medical device industries. The latest edition examines recall data from Q1 2025, January through March, and offers an early look at April data. Among the key findings, the consumer product sector experienced its most active quarter, recording 101 recalls—the highest number in 14 years.

There were just 3.73 million vehicles recalled during Q1 2025, the lowest quarterly total for the automotive industry since Q2 2012.

Recall activity in the automotive, medical device, and Food and Drug Administration (FDA) regulated food sectors declined modestly in Q1 2025, with reductions of 13%, 9%, and 4%, respectively. Despite these shifts, the overall totals remain broadly in line with recent averages.

The average age of U.S. light vehicles rose to 12.8 years, an increase of two months for the second consecutive year in 2024, according to new analysis from S&P Global Mobility.

Vehicle registrations surpassed 16 million in 2024 for the first time since 2019, but it was not enough to offset the growing volume of aged vehicles as vehicles in operation grew to 289 million with a steady 4.5% scrappage rate. Passenger cars dropped below 100 million for the first time since the 1970s according to S&P Global Mobility’s research.

“Passenger cars are continuing a steady decline toward equilibrium as consumer preference shifts to light trucks,” said Todd Campau, Aftermarket Practice Lead at S&P Global Mobility. “The vehicle fleet continues to demonstrate impressive resilience even as it faces stress from high new and used prices and economic uncertainty.”

The average age for passenger cars climbed to 14.5 years, while light trucks average is showing very gradual growth to 11.9 years.

Northern Plains, Northwest, and Southern states like Mississippi and Alabama are seeing higher-than-average vehicle ages, with Montana leading by over five years. Some states, including Mississippi and North Dakota as well as the District of Columbia, are seeing acceleration in vehicle age, while Colorado and Hawaii are aging far more slowly.

“The macro trend for average age may not correlate with what consumers see in their community, as aging rates can vary significantly from region to region,” said Campau.

For the first time in several years there is upward pressure on the average age metric for Battery Electric Vehicles as their sales growth slows. Average age for BEVs still remains low, at 3.7 years, with growth in line with the overall market in 2024. As consumers have warmed to hybrid options, Plug-In Hybrids’ aging has stayed flat at 4.9 years, and traditional Hybrids have reduced in average age from 6.9 to 6.4 in the past year. According to Campau, “Consumer preference currently is favoring hybrid and plugin hybrid options over fully battery electric vehicles to a large extent, driving average age to flat or even negative for those propulsion types. Alternative propulsion average age will continue to depend heavily on consumer sentiment for the next several years as they continue to build overall share in the vehicle fleet.”

As the cost of both new and used vehicles continue to be elevated, and the vehicle fleet growing to 289M, up 3M since 2024, aftermarket opportunities are expected to continue to grow. With the heavy vehicle registration years of 2015 – 2019 moving into the aftermarket space, there will be stronger opportunity for maintenance and repair as these vehicles roll off warranty.

New-vehicle sales momentum continued from the end of March and into April, before beginning to taper off. New-vehicle inventory declined further, by 7.4% from March, according to the Cox Automotive analysis of vAuto Live Market View data.

May opened with a total supply of new vehicles on dealer lots across the U.S. at 2.49 million units, down 7.4% from the 2.69 million units at the start of April and down 10.5% from a year ago. Seasonal patterns persist, as it is not unusual to see sales rise during the traditional “spring bounce.” Inventory, however, is not being replenished at the same rate. Some automakers are likely holding the line on deliveries and production, as everyone struggles with the uncertainty surrounding the administration’s tariff policies.

Cox Automotive’s vAuto Live Market View days’ supply is based on the estimated retail sales pace for the most recent 30-day period. New-vehicle days’ supply, at the start of May, was 66, down 16 days compared to last year and down six days from last month.

Consumer demand for electric vehicles (EVs) has remained stable, according to the J.D. Power 2025 U.S. Electric Vehicle Consideration (EVC) Study,SM  released today. The study reveals that 24% of vehicle shoppers say they are “very likely” to consider purchasing an EV and 35% say they are “somewhat likely,” both of which remain unchanged from a year ago.  

“Despite the market volatility, EVs have found a solid ground for consumer consideration,” said Brent Gruber, executive director of the EV practice at J.D. Power. ”To further capitalize on that interest and spur adoption moving forward, the industry needs to have products that meet consumer needs and wants at prices that are affordable. Additionally, the industry should better educate consumers about EV ownership to ease concerns—many of which, such as those related to public charging, are less problematic than they might seem when it comes to actually owning an EV.”

Following are some key findings of the 2025 study: 

  • EV customers active in cross-shopping: EV shoppers who say they are “very likely” to consider an EV cross-shop an average of 2.9 brands, while those who say they are “somewhat likely” shop an average of 2.8 brands. This is in alignment with the J.D. Power 2024 U.S. Sales Satisfaction Index Study, SM which found EV buyers shopped 3.0 different dealer brands compared to 2.5 for gas-powered vehicle shoppers. “As more EV options come to market, this should serve as an encouraging sign for automakers because it’s an opportunity for them to gain a foothold and pull shoppers from outside their brands. This year’s study results also show that EV shoppers consider products from mass market and premium brands alike, highlighting the opportunity to capture consumer interest with brands or products that shoppers may not have otherwise considered,” Gruber said.
  • Purchase price and cost of ownership concerns decline, while charging concerns persist: Charging station availability remains the top concern, with 52% of shoppers citing it as a reason for rejecting EVs. The continuing concern with charging, coupled with flattening overall EV interest, points to a lack of progress in consumer education on these issues. However, while consumer rejection due to purchase price has dropped 4 percentage points year over year to 43%, concern with cost of ownership has dropped 2 percentage points to 33%.
  • Young and higher-income shoppers show most interest but rarely overlap: Only 17% of consumers who are in the 25-49 age range have an annual income of over $100,000. “It’s an interesting dichotomy because younger consumers are the most receptive to EVs, but also the least likely to be able to afford them, while older consumers have the financial means but show less interest,” Gruber said. “Much of the recent growth in the EV space has been fueled by products from mass market brands, which demonstrates the pent-up demand for more affordable products.”
  • Midwest states least enthusiastic about EVs: When looking at EV consideration by region, the lowest shares of consumers who say they are “very likely” to consider purchasing an EV live in Wisconsin and Kentucky (18% each), Minnesota (17%) and Ohio (16%). This is influenced by several factors, including concerns about EV performance in cold climates and the stronger loyalty of consumers in these regions to traditional automakers.

The market continues to defy typical seasonal trends, posting a +0.11% increase last week, a notable contrast to the pre-pandemic average for this week, which typically saw a decline of just around -0.20%, according to Black Book’s weekly insights.

Nationwide sales rates remain robust, consistently averaging above 60%, with strong bidder attendance and level of bidding activity.

Car Segments:

  • On a volume-weighted basis, the overall Car segment increased +0.08% For reference, in the previous week, cars increased +0.17%.
  • The 0-to-2-year-old Car segments were up +0.18% and 8-to-16-year-old Cars increased +0.13%.
  • Six of the nine Car segments reported an increase in values last week.
  • After eight consecutive weeks of gains, averaging a weekly increase of +0.31%, the Compact Car segment experienced a shift last week, declining by -0.31%. Vehicles aged 0 to 2 years also saw a decrease of -0.28%, while those aged 8 to 16 years continued to rise, recording an increase of +0.13%.
  • The Full-Size Car segment recorded its tenth consecutive week of gains last week, posting an increase of +0.45%. This surpasses the ten-week average weekly increase of +0.40%.
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Truck / SUV Segments:

  • The volume-weighted, overall Truck segment increased +0.11% compared to the increase seen the prior week of +0.26%.
  • The 0-to-2-year-old models saw an average increase of +0.18% and the 8-to-16-year-old models experienced an average increase of +0.11%.
  • Nine of the thirteen Truck segments experienced an increase in values last week.
  • The Minivan segment continues to show substantial weekly gains, rising by +0.75% last week, following a +0.84% increase the prior week. Over the past nine weeks, the segment has averaged a weekly increase of +0.48%.
  • After eleven consecutive weeks of gains, the Full-Size Crossover/SUV segment experienced a decline of -0.32%. Vehicles aged 8 to 16 years saw a steeper drop of -0.64%, while those aged 0 to 2 years decreased by -0.20%.
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