If you think car buying has gotten crazy expensive, you’re not imagining things. At the close of 2024, Cox Automotive reported that the average new car costs $48,724 — up 2.3% since the start of last year.
Of course, that figure is an average — some models cost far more, and some cost considerably less. Prudent buyers can focus on economical models to trim expenses. But 2025 marks a notable shift in pricing because it’s the first year without any vehicles — even budget-friendly ones — starting under $20,000.
So what’s driving the rise in car prices in 2025, how might policy changes affect costs, and how can you minimize spending if you need a new vehicle? We’ll explore those questions below, but buckle up first.
What’s Driving Car Prices Up in 2025?
To get a clearer picture of the new-car landscape, I spoke with Michael Douglas, Head of Dealer Operations & Credit at Chase Auto. Douglas says multiple forces are pushing new-car prices higher — and it’s not solely inflation or supply chain disruptions.
“Over the last year, car prices have risen due to supply chain disruptions, increased demand, rising material costs, inflation, the shift to electric vehicles, and regulatory changes,” Douglas told me. “These factors have led to production delays, reduced inventory, and higher manufacturing costs.”
Douglas expects supply chains might normalize this year, but that won’t necessarily halt price increases.
“Continued technological progress, particularly in EVs, and macroeconomic trends like inflation will keep affecting vehicle pricing,” Douglas explained. “Plus, consumers gravitating toward sustainable and feature-rich cars, along with potential regulatory adjustments, could further shift pricing.”
Another major element is tariffs on imported vehicles and components. Many cars bearing American brand names aren’t built exclusively in the U.S., and even domestically assembled models often rely on foreign parts. President Donald Trump has implemented 25% tariffs on certain foreign-made cars and parts, and automakers may pass that additional expense to buyers. Avoiding the duty would require relocating manufacturing and supply chains to the U.S., which demands substantial time and investment.
How Are Elevated Car Prices Affecting Auto Loans?
As vehicle prices climb, a growing number of buyers are choosing longer auto loan terms to keep monthly payments manageable. The catch? Longer terms usually increase the total interest paid, making the car more expensive overall.
“Rising car prices have prompted longer loan terms, often stretching to 72 or 84 months,” Douglas told me. “While this reduces immediate payment pressure, it leads to greater overall interest costs and ups the chance of negative equity, where the vehicle depreciates faster than the loan balance falls. That can complicate trade-ins, since borrowers may still owe more than the car is worth, potentially causing bigger financial headaches down the road.”
Stretching a loan out might look sensible for your monthly budget, but you should consider other cost-cutting options before agreeing to a very long loan.
Ways to Save on a Car in 2025
With the average new vehicle flirting with $50,000 (or even above), buyers will need to be resourceful to limit spending. Here are tactics to help you save on a car in 2025:
Think About Certified Pre-Owned Instead of New
The most straightforward route to save is buying used. That’s obvious. But older, high-mileage vehicles are cheapest for a reason — they’re more prone to breakdowns and expensive repairs. A brand-new car usually includes a warranty for several years, reducing unexpected maintenance costs.
Certified pre-owned (CPO) cars are a solid middle ground. CPO vehicles, sold through dealerships, cost less than new models because they’ve had prior owners. Yet the CPO designation generally indicates low mileage, a comprehensive inspection, and some warranty coverage for added peace of mind.
Purchase at the Optimal Time
Tax season often brings strong dealership incentives timed to align with tax refunds. Conventional wisdom also suggests dealers may offer better deals when they’re eager to hit targets at month-, quarter- or year-end. December frequently presents enticing opportunities to buy.
Douglas recommends another timing cue: “At the end of a model year.” (This differs from the close of the calendar year.) For example, when an automaker begins selling the 2026 iteration of a vehicle, they’ll be motivated to move remaining 2025 units quickly, often with significant discounts.
Do Thorough Research
A little homework can save a lot. Compare models to identify the best value and pick the vehicle that satisfies your needs at the lowest price. Be sure to account for manufacturer incentives, special financing offers, and rebates. Use a car comparison worksheet to organize your findings.
“Concentrate on the total cost of ownership, including fuel efficiency and upkeep,” Douglas advised.
For example, estimate the miles you drive monthly, review current fuel prices, and calculate how much each candidate vehicle will cost in gas based on your driving habits and the manufacturer’s fuel-economy numbers.
Also check your credit score. The best auto loan rates typically go to scores of 800 or higher. If your score is low — or just a few points below a threshold for a better rate — spend three to six months improving it by paying down debts and lowering credit utilization.
Learn negotiation strategies for car buying as well. Entering the dealership confident in how you’ll navigate the discussion can change the outcome.
Jonathan Price is a Certified Financial Education Instructor® and a personal finance writer and editor. He’s covered autos for 12 years and finance for the last seven years. Find his work on outlets like USA Today, Business Insider, LendingTree, LendEDU, Forbes, and Time Magazine.
