Used Car Market Faces Challenges in 2025
The car and truck market is heading towards a period of increased challenges, driven by factors that will primarily impact used car buyers. The market is still reeling from the shortages that originated during the COVID-19 pandemic, a situation further complicated by potential tariffs.
New car sales hit a low point in 2022, due to the impact of these shortages on assembly lines. This slow year for new car sales is now creating difficulties for those seeking used cars.
While new cars depreciate, the three-year-old vehicle is often considered the gold standard for used car shoppers. At this age, a car has depreciated significantly in value but still maintains many miles of reliable service.
Unfortunately, the supply of three-year-old vehicles is expected to be low in 2025. Estimates from Edmunds, a popular car-shopping company, suggest that 2025 will be a particularly difficult year for finding these vehicles.
Why 2025 is a Concern
The primary reason for this shortage stems from the 2022 new car sales figures. Sales reached 13.8 million that year – the lowest level since 2011, when the nation was still recovering from the Great Recession.
“We kind of have known since COVID that that was an impact that was coming,” said Brian Moody, executive editor of Kelley Blue Book and Autotrader.
Impact of Leases
Car and truck leases also plummeted in 2022, compounding the scarcity of used vehicles. Edmunds predicts the availability of leased vehicles to dwindle in 2025.
Between 2019 and 2022, the annual volume of used vehicles coming off leases exceeded 4 million. Edmunds forecasts that this figure will drop to approximately 2 million this year.
“A lot of those aren’t coming back because they weren’t leased in the first place,” Moody said.
Furthermore, Edmunds predicts that “gently used” vehicles, those that are two to four years old, will be scarce in 2025.
“If you are going to be in the used car market in 2025, you will come across far fewer nearly new used vehicles, vehicles that are two years old, three years old, four years old,” said Ivan Drury, director of insights at Edmunds.
Vehicles in this age range are consistently in high demand because they are often still under warranty, and their depreciation makes them a comparatively good deal.
Tariffs and Their Potential Impact
This used car crunch arrives at a time when economic conditions are already challenging for consumers. The average price for a new vehicle in January rose to nearly $48,118, according to Edmunds. In comparison, the average used vehicle cost a more modest $24,402.
Additional disruption might come from potential tariffs. The Trump administration has been considering and implementing tariffs, which could further affect the automotive industry.
Last week, a 25% tariff on Canadian and Mexican goods was implemented, along with a 10% tax on Chinese goods. The auto industry was given a temporary exemption from the 25% tax, which was later expanded to cover any product covered by the United States–Mexico–Canada Agreement.
According to Edmunds, of all new U.S. vehicle sales through February, 17% were built in Mexico, 7% in Canada, and 27% in other foreign countries. Even cars built in the United States often include parts sourced from other countries.
“A one-month exemption offers a welcome reprieve, but the looming threat of tariffs still hangs over the automotive industry like a dark storm cloud,”
said Jessica Caldwell, head of insights at Edmunds.
If tariffs are imposed, the cheapest vehicles may be affected the most.
“We think that 40% of vehicles priced under $40,000 would have a direct impact from tariffs,” Moody said.
David Bennett, manager of repair systems at AAA, predicted on new car prices rising under the Trump tariffs.
“It shouldn’t impact used cars that much unless people start buying used cars because they can’t afford new cars,”
Bennett said.
Tariffs could also lead to fewer dealer incentives, including discounts and low-interest financing, automotive experts noted.
Alternatives for Prospective Buyers
With a shortage of gently used vehicles expected, potential buyers have several options:
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Buy an older vehicle: Historically, a used vehicle would begin showing its age around five years, but that is less likely today. The average vehicle on American roads is nearly 13 years old.
“Things have gotten a lot better with durability,” Drury said. “Your motor’s going to keep going.”
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Consider a luxury vehicle: Luxury vehicles can be a good value in the used market. Their higher depreciation rates can make them more affordable.
“I might be perfectly happy to have a 5-year-old Mercedes-Benz because, for me, this would be the nicest car I’ve ever had,” Moody said.
- Explore used electric vehicles (EVs): EVs often experience high depreciation rates, making them an attractive option in the used market.
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Buy a new vehicle: In some cases, it may be more cost-effective to buy a new car. Dealers often offer discounts on new vehicles, with lower interest rates and promotional financing options.
“Our intuition says that buying used is always cheaper than new,” Knizek said, “but it may not always be the case.”
