The automotive market is experiencing a stark divergence: while new vehicle prices remain above $50,000, used car prices have fallen significantly, according to ZeroSum's "State of the Dealer: 2024 Overview and 2025 Outlook."
New vehicle inventory reached 3.25 million units in December 2024, nearing pre-pandemic levels of 3.3 to 3.5 million. However, vehicle movement has not kept pace with this inventory growth. Despite rising supply, pricing has stayed high due to factors like inflation, the discontinuation of lower-end models, and a focus on high-end pickups, SUVs and premium trims.
"Normally, rising inventory and slower movement would lead to declining prices," said Jeff Englishmen, vice president of dealer success at ZeroSum. "But inflation and shifts in OEM production have kept consumer costs elevated during a time of economic uncertainty."
To remain competitive, ZeroSum recommends auto dealers focus on transparent pricing, list available incentives like cash back and low APR offers, and consider extended loan terms to make purchases more appealing. Dealers should also highlight product enhancements to justify higher prices for new models.
Used Vehicles: A Buyer’s Market
While new car prices remain high, the used vehicle market has followed a more expected trajectory. Used vehicle inventory grew to 1.95 million units in December 2024, up from an average of 1.68 million in 2023. Meanwhile, used car prices dropped from nearly $33,000 in December 2022 to under $26,000 at the end of 2024.
The drop in used car prices is partly due to an aging inventory. Only 24.8% of used vehicles in 2024 are one to three years old, compared to 29.8% in 2022. Meanwhile, the share of vehicles over seven years old has grown from 27.1% in 2022 to 42.7% in 2024.
"Dealers need to align their strategies with these shifting dynamics," Englishmen added. "Promoting value and affordability will be key in the year ahead."
As 2025 begins, dealers will face a challenging landscape, balancing high new car prices with the opportunity to attract budget-conscious buyers through competitive used car offerings and innovative financing options.
