December has become one of the biggest car buying months of the year and this December should be something to remember. Sales are looking very healthy as carmakers spend lavishly on product promotions, interest rates dip and higher tariffs – and prices – appear on the horizon.
Dealers have been busy this month as buyers rush to shop before the new year.
Anyone watching television this month has likely been bombarded with ads pitching “spectacular” savings on a new vehicle – as long as you buy now.
Boosted by the biggest marketing effort of the year and some ‘buy-now’ sentiment among consumers worried about price inflation in the future as the threat of tariffs hovers over the car business, December new-vehicle sales are expected to be robust.
Cox Automotive predicts December’s seasonally adjusted annual rate (SAAR), or sales pace, is expected to finish at 16.5 million as interest rates ease back. If that holds true, 2024 will mark the best year the industry has had since the start of the COVID pandemic. But whether momentum will hold in 2025 is another matter.
Sales remain steady at year end
There are plenty of big deals available this month.
This month’s SAAR is up from last year’s 15.9 million level and equal to November’s 16.5 million. Sales volume in December is expected to reach 1.47 million, a 7.7% increase from last month but flat compared to one year ago when automakers also poured millions of dollars into year-end and Christmas promotions.
“With the U.S. election season now in the rearview mirror, many buyers who thought it best to wait to get the best deal are realizing that now is the time to buy before new administration policy changes are implemented,” said Charlie Chesbrough, senior economist at Cox Automotive.
“Some vehicle buyers are taking advantage of EV discounts that could be dialed back by the new administration, and others may be concerned potential tariffs may hit prices. So, the market has strong tailwinds as the year comes to a close,” Chesbrough added.
Tariffs concern potential buyers
There’s growing concern about Trump tariffs and other policies that could drive up vehicle prices.
Buyers have reason to question what the new vehicle market will look like in 2025, analysts are cautioning, as the incoming Trump administration lays out numerous moves that not only could impact pricing but even the availability of some foreign-made products.
Jessica Caldwell, head of insights at the car-buying service Edmunds, said, “The tariffs proposed by the incoming president might not be more than negotiation tactics, but if they were enacted they would likely affect the costs of nearly all goods and services — not just car prices.”
“Consumers would have less disposable income, and automakers would likely need to increase incentive spending just to move metal,” she added.
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Priced out of the market
Many buyers have had to downsize or even switch to used vehicles due to rapidly rising prices.
“Affordability – or the lack thereof – in the new vehicle market was the recurring theme of 2024, but things started taking a more positive turn on the back nine as inventory continued to improve, stronger incentives trickled back into the market, and new vehicle interest rates declined after peaking in May,” Caldwell said.
Cox, Edmunds and other research firms may disagree on the precise number but all put the average transaction price – what customers actually pay after factoring in discounts, options and dealer markups – at more than $48,000. That is just short of the record, which topped $50,000, reached during the depths of the pandemic when dealers were adding significant markups to popular vehicles.
But there is growing concern 2025 could set new records if the Trump administration follows through on some plans it has been floating.
The Wall Street Journal, citing a report by Wolfe Research, estimated the tariffs proposed by the incoming Trump administration could add $3,000 to the price of a typical new vehicle, impacting not only products coming from Europe or Asia but such popular models as the Nissan Sentra, Ford Maverick, Honda Civic and Toyota RAV 4 built in Mexico and Canada.
Consumer confidence dips
The prospect of high prices appears to be weighing on consumers.
The Conference Board, which maintains a closely watched index of consumer sentiment, noted in its report for December, “Compared to last month, consumers in December were substantially less optimistic about future business conditions and incomes. Moreover, pessimism about future employment prospects returned after cautious optimism prevailed in October and November.
Healthy consumer sentiment is considered a necessity for strong sales of new vehicles.
Among age groups, December’s fall in confidence was led by consumers over 35 years old – a group that makes up the bulk of the new vehicle buying populations, according to the Conference Board.
Strong finish boosts ’24 sales totals
Overall, Edmunds’ experts anticipate a very slight rebound in the auto market in the new year, forecasting 16.2 million new vehicle sales in 2025. This tally would represent a 1.4% increase from 2024 and the highest annual new vehicle sales figure since 2019.
Considering the strong Q4, full-year 2024 U.S. auto sales, as estimated by Kelley Blue Book, are expected to reach approximately 15.85 million units, reflecting a 2.3% increase from 15.55 million in 2023 and slightly above Cox Automotive’s forecast of 15.7 million shared at the beginning of the year.
While the Federal Reserve Board has reduced its key interest rate, car loans also respond to pressure in the bond market, which remains skeptical of the new administration’s ability to reduce inflation given its agenda of tariffs and the expansion of the federal deficit if Trump get the tax cuts he is planning.
GM keeps sales crown, but Honda gains share
Meanwhile, Cox estimated year-over-year sales gains were delivered in 2024 by every major manufacturer except Stellantis and Tesla, while BMW’s sales were flat. The 2024 sales crown will go to General Motors as GM’s sales are forecast to finish near 2.7 million units, up over 4.2% from last year, according to Cox.
If success is measured by higher market share, however, Honda will be the big winner in 2024, gaining half a point in share thanks to a more-than-20% sales increase from the HR-V and Civic, the two lowest-priced vehicles in its portfolio. In 2024, Honda Motor sales in the U.S. – combining Honda and Acura volume – outpaced Stellantis.
The Euro-American automaker is currently searching for a new CEO to replace Carlos Tavares who resigned last month in the face of growing pressure to reverse recent declines in sales, market share and earnings. Weak U.S. demand, particularly for Ram and Jeep products, has been a particular headache for the automaker.
Paul A. Eisenstein contributed to this report.
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