Top market influencers of 2025

In 2025, shoppers chased value more than ever, but not because cars suddenly got cheap. Four forces did most of the work:

1. Ownership costs squeezed every budget – Total cost of ownership kept climbing faster than overall inflation, especially on the used side.
   
   
2. The used market carried the value load – With new prices stuck near record highs, shoppers shifted hard into older, more budget-focused inventory.
   
   
3. Tariffs pulled demand forward – Policy uncertainty drove a rush to buy before prices might spike, shifting the timing of purchases more than the prices themselves.
   
   
4. EV tax credits expired and hybrids stepped into the gap – A sprint for remaining incentives gave way to a cooldown in EV demand, while hybrids became the practical upgrade for cost-conscious shoppers.

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Total cost of ownership, not prices, defined the year - If 2024 was about declining affordability, 2025 was the year the hunt for affordability came to life in force with shoppers working within tighter budgets. Generally prices finally stopped climbing, but the cost of simply owning a vehicle has moved higher.

Insurance was a key contributor, as rising repair costs, higher claim severity, and more expensive vehicles fed directly into premiums. That pressure stacked on top of higher loan payments, fuel, and maintenance.

Compared with 2019, the total cost of ownership (TCO) of a vehicle has outpaced general inflation:

• New-vehicle TCO is up about 29%.
• Used-vehicle TCO is up about 36%.
• Overall inflation over the same period is closer to 26%.

On the surface, pricing looked relatively stable:

• Average new-vehicle list prices were essentially flat year-over-year (YoY), at about $49.4k, down 0.1%.
• Average used list prices climbed to around $28.9k, up about 4.5%.

But the affordability picture has changed dramatically in a few short years. When someone asked, “What does $35k buy me now?”, the answer had shifted sharply. In 2019, that budget could land a brand-new Camry, CR-V, or F-150. In 2025, the same $35k typically buys a two-year-old version with meaningful mileage.

So shoppers adapted by changing what they were willing to buy. The fastest-turning used vehicles of 2025 bring that picture into clear view. Smaller sedans, compact crossovers, and efficient, clean models like the Model Y, Model 3, and Lexus NX Hybrid now sell in roughly 25 to 30 days compared with about 40 days for the average used vehicle.

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How the used market carried the value load - With new car prices stalled around a $50k average for the past year, the used market became the solution for budget-conscious shoppers.

CarGurus data shows:

• Used listings rose about 5% YoY, with inventory gains across all dealer types.
• Franchise dealers led growth, increasing used inventory around 7%, versus roughly 3% at independents.
• Used retail sales outpaced the new market, rising around 8% YoY.

The more important shift was in age mix:

• Vehicles 3-5 years old lost share, squeezed from both sides by very young (1-2 year old) inventory and much older vehicles.
• Vehicles 6-10 years old now make up a significantly higher share of used listings than they did in 2019.
• Inventory of vehicles three years old and newer is still about 9% below pre-COVID levels.

This is the “COVID gap” at work. Fewer vehicles built and leased in 2020-2022 means fewer late-model trade-ins and off-lease units cycling back now. That structural shortage in the 3-5 year old sweet spot is keeping a floor under used pricing, even as total inventory improves.

For shoppers, that has two practical consequences:

1. “Affordable” often means older and higher mileage rather than truly low-priced.
2. Aggressively priced used EVs have moved into the same consideration set for value-focused buyers.

You can see this in the fastest-selling used models of 2025. On one side were out-of-production, budget-friendly nameplates like the Buick LeSabre, Chevrolet Cobalt, and Mercury Mariner, alongside high-interest clean vehicles like the Tesla Model Y, Tesla Model 3, and Lexus NX Hybrid. These smaller body styles consistently turned in roughly 25 to 30 days, compared with about 40 days for the average used vehicle.

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Tariffs reshaped timing more than transaction prices - Tariffs were the main headline risk going into 2025, and they absolutely moved the market—but not in the way most originally expected. While tariffs didn’t trigger the immediate sticker shock many shoppers feared, they created a pull-forward in demand early in the year. Shoppers rushed to beat the expected price increases, particularly options under $50k. That deadline mentality drove a surge in demand and kept retail activity elevated through mid-year.

But as those lower-priced 2025s phase out, 2026 pricing is positioned to play a larger role in setting the market. Their higher MSRPs were partially offset this year by softer pricing and more incentives on remaining 2025s, which helped keep overall new-vehicle pricing stable.

In effect, tariffs did more to change when people bought than what they paid in 2025. Sales were strong through mid-year, but the cooling we saw in October and November raises the specter that much of that demand was pulled ahead. The harder question for 2026 is how much buying was simply borrowed from the future and how much tariff cost ultimately lands on the consumer.

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EV tax credits expired, hybrids stepped into the gap - The expiration of federal EV tax credits produced one of the clearest patterns of the year. As the deadline approached, Q3 turned into a sprint as shoppers tried to lock in remaining incentives. Q4 then saw a noticeable cooldown once those credits disappeared.

Underneath that timing whiplash, the EV story split into two segments:

• New EV interest skewed upscale. CarGurus’ most viewed new EVs included models such as the Volkswagen ID.Buzz, Mercedes-Benz G-Class EV, Cadillac Escalade IQ, and other premium SUVs and trucks that sit well above the broader new-vehicle price average.
• Used EV shoppers hunted for deals. Teslas dominated the used EV leaderboard for shopper views, with Model 3, Model Y, Model S, and Model X taking the top four spots. Model 3 and Model Y were often listed in the low to high $20k range, while options like the Nissan Leaf frequently sat well under $10k.

Hybrids quietly turned recent market volatility into an opening. New hybrid inventory grew nearly 18% as more models entered across a wider range of price points, bringing the average to about $46.1K. Retail sales followed that expansion, growing much faster than the overall new market. The fastest-turning new vehicles of 2025 were also hybrid-heavy, led by models like the Hyundai Palisade Hybrid, Toyota’s Grand Highlander Hybrid, Highlander Hybrid, and RAV4. Many sold in under 20 days on average, compared with more than 60 days for the typical new vehicle.

When shoppers searched for hybrids, Toyota was the center of gravity in both new and used:

• On the new side, the greatest amount of views focused on Land Cruiser, Sequoia, Grand Highlander Hybrid, Sienna, Camry, alongside the Prius.
• On the used side, buyers gravitated toward proven staples like Prius, RAV4 Hybrid, Camry Hybrid, Sienna, and Lexus RX Hybrid, with many of these hybrids still averaging under $29k.

Taken together, 2025 pushed hybrids firmly into the role of “practical upgrade” for shoppers who want lower running costs without taking on EV pricing or charging risk.

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What to watch in 2026

Tariff pass-through: do prices finally move? - In 2025, OEMs and dealers largely held the line on pricing even with tariffs in the mix. With several trade agreements advancing and USMCA renegotiation approaching, some tariff pressure could ease in 2026.

The bigger unknown is how much cost automakers will choose to pass through:

• If sticker and transaction prices move higher, especially above $50k, new-vehicle demand in the upper bands could soften, pushing more shoppers toward used vehicles.
• If OEMs keep prioritizing volume and share, the market could see another year of relatively stable prices, with affordability gains driven more by incentives and mix than base MSRPs.

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Rates, insurance, and the stubborn monthly payment - The outlook for rate cuts remains uncertain heading into 2026. Concerns about inflation and U.S. debt levels may keep long-term treasury yields, and therefore auto loan rates, elevated even if the Fed nudges short-term rates lower.

Layer on insurance costs that are still well above pre-pandemic norms, and the picture for monthly payments is murky:

• Payment-driven buyers are likely to keep strict budget caps.
• Cross-shopping across new, used, ICE, EV, and hybrid options will remain intense as shoppers look for the lowest all-in cost, not just the best discount.

Until total cost of ownership moderates, affordability will stay as a filter on every purchase decision.

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Late-model used supply: the start of a reset - As the market moves further away from the chip shortage years, more 3-4 year old vehicles should start returning as lease maturities and trade-ins. The key question is how quickly that shows up on dealer lots.

A meaningful rebound in late-model supply would give shoppers more “like-new” options, ease pressure on older segments that have been doing the heavy lifting on affordability, and could soften used pricing, particularly in the 3-5 year old range. But a full return to historical patterns will likely take several years. 2026 is more likely to be the beginning of normalization than the end point.

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EV demand without a safety net - With federal tax credits gone, 2026 will provide the clearest look yet at the “natural” rate of EV demand:

EV growth is expected to slow as the market adjusts to a landscape without broad tax credits, shifting more momentum toward hybrids. Hybrids continue to gain share as a practical middle ground between ICE and full EVs, appealing to shoppers who want efficiency without range tradeoffs. At the same time, used EVs have room to expand from a smaller base and increasingly offer some of the strongest value per dollar in today’s market.

For dealers, the 2026 playbook likely involves leaning into hybrids as high-velocity inventory, treating used EVs as a distinct value story, and staying flexible on new EV stocking levels until the post-incentive baseline becomes clear.

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Sales Outlook 

New and used sales are expected to move in different directions in 2026. After a pull-ahead boost in 2025, new-vehicle sales are expected to flatten around 16 million, with potential downside if OEMs pass more tariff costs through to consumers. Used volumes are projected to climb toward roughly 39 million, edging back toward pre-COVID levels as more late-model vehicles cycle into the market and shoppers stay focused on value. The used side could see additional upside if higher new-car prices push more buyers to cross-shop older inventory.

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On clean vehicles, hybrids are the clear winner in the forecast. The share of new hybrid sales continues to rise into the mid-teens by 2026, while new EV share declines after the expiration of EV tax credits and price sensitivity increases. In the used market, both hybrids and EVs gain share from a small base, with used EVs showing the most upside as more inventory returns and pricing undercuts comparable gas models.

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