The Shocking Truth About New Car Prices Right Now

As we navigate through 2025, the landscape of new car prices presents a complex picture. Recent data reveals that while prices have remained relatively stable, various factors are influencing the market, including tariffs, consumer behavior, and manufacturer incentives. This article delves into the current state of new vehicle prices, the dynamics of electric vehicle (EV) sales, and what consumers can expect in the coming months.

Where May’s New Vehicle Prices Shifted

According to Kelley Blue Book data, new car prices held steady in May, despite some manufacturers raising costs due to tariffs. The average manufacturer’s suggested retail price (MSRP) for a new vehicle reached $50,968, marking a slight increase from April and representing the highest figure recorded in 2025 thus far. This reflects a 2.1% year-over-year increase, although it is slightly below the peak of $51,990 seen in December 2024.

Average Transaction Prices (ATP) for new vehicles were nearly identical to April’s figures, settling at $48,799—an increase of 1% compared to the previous year. Notably, sales in the dealership sector dropped to 15.6 million units, down from 17.3 million in April, as the pre-tariff shopping rush began to wane. Certain segments, particularly sports cars, luxury vehicles, and luxury subcompact SUVs, experienced the most significant price increases, while small and mid-size pickup trucks saw a modest rise of 0.9%, reaching an average price of $42,062.

EV Incentives Surge Despite Many Automakers Dialing Back

The landscape of incentives for new vehicles presents a mixed bag. In May, new car incentives slightly increased from 6.7% of ATP to 6.8%, amounting to an average of $3,297. However, several automakers, including Volkswagen, Mazda, and BMW, reduced their incentive spending during the same period. In contrast, companies like Tesla, Toyota, and Nissan ramped up their incentive offerings, with Toyota’s spending rising by an impressive 20%. Despite this increase, Toyota’s incentives still fell below the industry average.

Interestingly, the average EV incentive package surged from 11.6% to 14.2% of ATP, reaching $8,225—the highest level since 2018. This trend reflects a growing emphasis on promoting electric vehicles, even as some manufacturers face challenges in maintaining competitive pricing. For instance, Tesla’s ATP declined by 1.5% to $55,277, while General Motors celebrated its second-best month ever for EV sales.

Market Dynamics and Consumer Behavior

The current market dynamics are influenced by various factors, including tariff policies and consumer behavior. Erin Keating, an Executive Analyst at Cox Automotive, noted that while tariffs are adding uncertainty to the new vehicle market, prices are holding steady. Many automakers are committed to maintaining pricing stability in the near term, although rising costs may challenge this approach as the summer progresses.

In March and April, U.S. consumers flocked to dealerships, eager to secure deals before potential tariff-induced price hikes. Even in May, shoppers found comparable deals, with some manufacturers extending promotions, such as Ford’s employee pricing initiative through the Fourth of July weekend. Despite a slowing sales pace, dealership sales were up 1.4% year-over-year in May, indicating that consumers are adapting to the evolving market conditions.

Final Thoughts

As we look ahead, the landscape of new car prices remains fluid. While dramatic price increases may not occur as swiftly as some anticipated, challenges persist in finding specific models and trims. The decline in U.S. auto imports by 72% in May adds another layer of complexity to the market. Consumers may find themselves facing difficulties in locating their desired vehicles, even as prices stabilize.

In conclusion, the new car market in 2025 is characterized by a delicate balance of pricing stability, evolving consumer preferences, and the ongoing influence of tariffs and incentives. As the summer unfolds, both consumers and manufacturers will need to navigate this intricate landscape, keeping an eye on the shifting tides of the automotive industry.