Concerns about a potential substantial increase in new vehicle prices has sent Americans scrambling to car dealers in April — the second straight month. The result is big sales numbers and shrinking inventory that could end up raising prices anyway.
New vehicle sales are expected to rise between 5% – 10% in April as consumers are looking to beat tariff-based price increases.
Depending upon which set of analysts you believe, new vehicle sales will jump between 5% and 10% as consumers look to take advantage of the break in automotive-focused tariffs — now over — enacted by the Trump administration. The levies are expected to raise new vehicle prices between $3,000 and $10,000.
According to estimates by Cox Automotive, new vehicle sales volume will rise 4.6% in April on a year-over-year basis. However, the minds at J.D. Power and GlobalData are predicting a 10.5% jump compared to the year-ago period.
“April results are dominated by the prospect of future vehicle price increases due to tariffs,” said Thomas King, president of the data and analytics division at J.D. Power.
“Beginning at the end of March, and continuing through April, consumers have been accelerating their vehicle purchases under the expectation that prices will rise soon. In fact, an extra 83,000 sales in March and 139,000 in April have occurred due to accelerated vehicle purchases.
Wild market
New vehicle sales rose in March and they’re going to follow suit again in April.
Predicting consumer behavior is already a tall task, but the on-again, off-again nature of President Donald Trump’s tariffs complicates the issue, thus the big difference between the predictions.
“Forecasting sales in this volatile market is quite challenging, and that is what we have right now, a market being steered by headlines coming from the White House,” said Charlie Chesbrough, senior economist at Cox Automotive.
One thing is for certain, anyone looking to buy a new car, truck or SUV is at least considering a move. The biggest hurry came last month, which saw sales come in 12% higher than what’s predicted for this month — using Cox Automotive’s number.
Better deals?
As buyers flock to dealers hoping to get something affordable, automakers are cutting back on incentives and inventory levels are dropping, raising the price of a new vehicle.
Trump’s tariffs are expected to raise prices on new vehicles so many consumers believe the time is now to find a good value.
The average manufacturer incentive spend per vehicle is on track to reach $2,808, a decrease of $260 from March, but an increase of $209 from a year ago. Expressed as a percentage of MSRP, incentive spending is currently at 5.6%, an increase of 0.3 percentage points from a year ago.
The result is the average transaction price for a new vehicle is higher. In April it is expected to reach $45,764, up $887 from April 2024, plus it’ll be up $975 from March, Power officials noted.
“The strong sales pace, combined with high average transaction prices mean consumers will spend more money buying new vehicles this month than any other April on record — and the third highest of any month on record. Consumers are on track to spend nearly $55.8 billion on new vehicles this month — 21.2% higher than a year ago,” Power’s King said.
Higher prices translate to higher monthly loan payments. Average monthly finance payments in April are on track to reach $742, an increase of $19 from April 2024, and the highest on record for the month of April. The average interest rate for new-vehicle loans is 6.80%, a nominal 18 basis point decrease from a year ago.
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Rollover effect
With consumers buying scores of new vehicles, inventory levels are dropping. According to Cox Automotive, new-vehicle inventory across the U.S. at the start of March was nearly 3 million units, with a measured days’ supply at 89.
New vehicle prices are rising slightly as more buyers reduce inventory. That’s trickling down to used vehicles as well.
By the beginning of April, inventory had declined to 2.7 million units, and days’ supply was at 70, thanks partly to the hotter sales pace. And new-vehicle inventory continued to slip through early April, with days’ supply falling to near 60 at a mid-month measure, Cox analysts note.
With new vehicle inventory levels dropping, some buyers are settling for late model versions of their preferred vehicle. Naturally, the availability of some popular used vehicles is dwindling as well. Additionally, the overall number of off-lease, recent-model used cars is down as well — part of the pandemic hangover. Thus, used car prices are rising too.
“The average used-vehicle price is trending towards $28,725, up $200 from a year ago. This reflects the combination of reduced supply of recent model-year used vehicles — due to lower new-vehicle production during the pandemic — fewer lease maturities and manufacturers moderating discounts,” King said.
“An increase in used-vehicle prices means that average trade-in equity is expected to rise slightly, up $328 year over year to $8,313. Currently, 23.3% of trade-ins carry negative equity—a decrease of 0.2 percentage points from April 2024.”
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