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The car market is getting back to normal. Slowly. Sales are rebounding. Inventories are no longer abnormally scant. Financial incentives, which dried up during the pandemic, are reemerging. Still, it’s a tough environment for buyers. Here’s what to know if you might be in the market.
1. Sales and costs
Total sales should grow a bit this year: Figure on about 16.3 million, up slightly from 2024’s already-solid 15.9 million vehicles sold. Interest rates on car loans should decline, albeit only slightly, after the Federal Reserve’s cuts last year and a bit more Fed easing later this year. Slightly lower financing costs also bode well for sales.
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2. Inventories
Buyers can expect a bit more selection as dealer inventories rebound — also good for sales. Among the most popular categories of cars this year, according to Joseph Yoon, consumer insights analyst at Edmunds.com:
- Big and compact SUVs. Roomy three-rows and, on the other end of the spectrum, small ones. Families with kids are often looking to upsize. Retirees and empty nesters often want to downsize.
- Pickup trucks of all flavors. Nothing new, considering how dominant trucks once meant for work have become in recent years.
- And hybrids, which had a banner year in 2024 and figure to stay in demand. “Consumers have made it pretty clear” that they’re interested in electrification, but not necessarily pure electric vehicles, notes Yoon. Hybrids like Toyota’s RAV4 and Honda’s CR-V are thriving as buyers look to save gas but not abandon it. More hybrid versions of popular models are rolling out, particularly from Toyota — hybrid Tacomas, Tundras, 4Runners, etc.
If you’re looking to score a big discount, EVs are the place to shop, Yoon says, provided that you are open to going electric. Between federal and state tax credits and discounts from manufacturers, there are juicy deals to be had. Note that any talk of doing away with the $7,500 tax credit on certain EV models could spur a huge wave of buying.
Brands with the most inventory in stock now, according to data from Cox Automotive, which could help buyers: Ford, Tesla and Stellantis-owned ones like Ram and Jeep. By contrast, inventories are tight at Toyota, Lexus, Honda and BMW, with scant room to haggle.
3. Buying advice
Some general buying advice, especially for folks who haven’t shopped lately:
- Be prepared for sticker shock, both on the prices of new cars and the rates on auto loans, says Yoon of Edmunds. The pre-COVID days when salespeople were ready to negotiate and loans could be had with 0% interest are long gone. Assess your buying power accordingly.
- Be flexible about what you want vs what you need. If you set your heart on one particular model or trim level, it could be hard to find, or cost a pretty penny.
- Lay the groundwork before you walk into a dealership. Identifying the car you’re interested in and contacting the dealer before you go in to see or drive it can help expedite the purchase. Otherwise, you’ll be competing with lots of buyers.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
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