23 May 2025
US new-vehicle sales are forecast to grow in May as a tariff-driven rush to showrooms tapers off amid record consumer spending. In its latest outlook, J.D. Power sets out its expectations.
Total new-vehicle sales, including retail and non-retail transactions, are projected to reach 1,489,800 units in the US during May 2025. This figure is stable when compared to May 2024. However, May this year has 27 selling days, one more than last year. Without adjusting for the number of selling days, the same sales volume represents a 3.4% increase.
The seasonally adjusted annualised rate (SAAR) for total new-vehicle sales is expected to reach 15.6 million units. This is a decrease of 100,000 units from May 2024.
Retail sales of new vehicles are anticipated to reach 1,235,713 units. When not adjusting for the number of selling days, the same sales volume reflects a 5% increase compared to 2024.
A tempered market
‘Following the surge in vehicle purchases in March and April, driven by the fear of tariff-related price increases, May sales reflect a more tempered market,’ said Thomas King, president of the data and analytics division at J.D. Power.
‘While many May sales were due to shoppers who accelerated their purchases, the sales benefit is being muted by the payback from consumers who purchased in March and April instead of May,’ he added.
During March and April, around 149,000 extra vehicles were sold, simply due to buyers bringing forward their purchases on the expectation of significant future price increases. This will present a headwind to the industry sales pace for the balance of this year.
Despite this effect, retail demand for new vehicles remains robust, with retail sales expected to increase 1.1% over a year ago.
Consumers continue to find competitive deals, although the value of manufacturer discounts has declined slightly. The average manufacturer incentive per vehicle is projected to reach $2,563 (€2,261). This represents a decrease of $200 compared with April and a reduction of $143 from the same period last year.
Prices stabilise
Coupled with this, the threat of higher vehicle prices has yet to materialise. Most manufacturers have committed to maintaining stable prices in the near term.
‘The consumer rush to showrooms in March and April did drive prices slightly higher, but the return to a more typical sales pace in May has led to a stabilisation of average prices. The average new-vehicle retail transaction price in May is expected to reach $45,462, up $649 or 1.4% from May 2024, but down $592 or 1.3% from April.’ King highlighted.
Expressed as a percentage of the manufacturer’s suggested retail price (MSRP), incentive spending currently stands at 5.1%, down 0.3 percentage points (pp) year on year. A similar dynamic exists with retailer profitability, which is slightly elevated but also showing signs of normalisation.
Total retailer profit per unit, including vehicle gross plus finance and insurance income, is expected to be $2,502 in May. This is a $98 increase from one year ago, but down $29 from April. Total aggregate retailer profit from new-vehicle sales for this month is projected to be $3 billion, up 9.8% from May 2024.
Increasing loan repayments in the US
Higher prices translate to higher monthly loan payments. Average monthly finance payments in April are on track to reach $748, an increase of $21 compared to May 2024. This marks a record for the month.
The average interest rate for new-vehicle loans is 6.93%, a 10 basis point decrease from a year ago. Consumers are on track to spend nearly $53.8 billion on new vehicles this month, an increase of 7% compared to 12 months ago.
‘The average used-vehicle price is trending towards $29,168, up $130 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 and fewer lease maturities as well as manufacturers moderating discounts,’ King said.
An increase in used-vehicle prices means that average trade-in equity is rising, up $415 year over year to $8,292. Despite higher used-vehicle prices, the number of new-vehicle buyers with negative equity on their trade-in is expected to reach 24.4, an increase of 0.5pp from May 2024.
Looking forward, the industry sales pace faces challenges on several fronts. Sales pulled forward into March, April and May will become a meaningful headwind for the balance of the year.
US Tariff uncertainty prevails
Tariff-related challenges remain uncertain. While their broader economic impact is unclear, tariffs pose a notable risk to vehicle demand. For many, though not all manufacturers, tariffs on imported vehicles and parts will significantly raise costs.
‘For the industry, the current tariffs on imported vehicles and vehicle parts will increase the manufacturers’ cost of the average vehicle by $4,275,’ stated King.
‘However, the tariff effect varies dramatically across manufacturers and also across vehicles within a manufacturer’s portfolio, depending on where those vehicles are produced and where their components are sourced from.’
Recently announced changes to the tariff structure mean that many domestically produced vehicles face a negligible increase in costs, while imported vehicles are incurring increases of up to 25%.
Despite rising production costs, consumer vehicle prices have largely remained stable. This is due to strong industry competition. Added to this is the fact that many vehicles in inventory were built before tariffs took effect.
This means manufacturers are cautiously managing their pricing strategies amid ongoing uncertainty around tariff structures. A recent trade agreement with one country, which reduced import tariffs, has offered some optimism. If similar deals follow, cost pressures and the need for price increases could ease further.
In general, prices are expected to rise, but by an amount significantly below that which is implied by the tariffs, and not at all on some models. Some pricing actions are anticipated to occur in June and July, but go-forward pricing is expected to fully materialise towards the end of the year.
The vehicle details
- Fleet sales are expected to total 254,069 units in May, down 7% from May 2024. Fleet volume is expected to account for 17.1% of total light-vehicle sales, down 1.2pp from a year ago.
- Internal combustion engine vehicles are projected to account for 74.9% of new-vehicle retail sales, a decrease of 4.1pp from a year ago.
- Sales of full hybrids (HEVs) are expected to reach 14.8%, an increase of 4.3pp from a year ago.
- Plug-in hybrid vehicles (PHEV) are on pace to make up 2.1% of sales, up 0.1pp from May 2024.
- Electric vehicles (EVs) are expected to account for 8.1% of sales, down 0.4pp.
- U.S. final assembly vehicles are expected to make up 53.6% of sales in May, up 1.4pp from a year ago.
- Trucks and SUVs are on pace to account for 81.9% of new-vehicle retail sales, up 1.8pp from May 2024.
The retail details
- Retail inventory levels are currently at 2.13 million units, a 23% increase from May 2024.
- The industry’s inventory days of supply is 57 days in May, up seven days from a year ago.
- A total of 57.5% of sales had positive vehicle gross, up 0.2pp from a year ago.
- The average new-vehicle retail transaction price in May is expected to reach $45,462, up $649 from May 2024. Transaction price as a percentage of MSRP increased to 91.4%, up 0.4pp from a year ago.
- Retail buyers are on pace to spend $53.8 billion on new vehicles, up $3.5 billion from May 2024.
- Average incentive spending per unit in May is expected to fall to $2,536, down $143 from May 2024. Spending as a percentage of the average MSRP is expected to decrease to 5.1%, down 0.3pp from May 2024.
- Average incentive spending per unit on trucks and SUVs in May is expected to be $2,670, down $87 from a year ago, while the average spending on cars is expected to be $1,948, down $417 from a year ago.
- Leasing is expected to account for 20.7% of sales this month, down 3.3pp from a year ago.
- The average time a new vehicle remains in the dealer’s possession before sale is expected to be 49 days in May, up from 45 days in stock from one year ago.
The financial details
- 34.5% of vehicles sold in less than 10 days in May, up 1.2pp from a year ago.
- Average monthly finance payments are on pace to be $748, up $21 from May 2024. The average interest rate for new-vehicle loans is expected to be 6.93%, down 0.1pp from a year ago.
- So far in May, average used-vehicle retail prices are $29,168, up $130 from a year ago. Trade-in equity is trending towards $8,292, up $415 from a year ago.
- 24.4% of trade-ins are expected to carry negative equity this month, an increase of 0.5pp from May 2024.
Nuanced US electric performance
The EV segment is experiencing a notable downturn this month, with its share of retail sales declining by 0.5pp year on year. This marks the weakest performance for the technology since February 2024 and effectively wipes out nearly two years of growth.
Despite this, the wider electrification trend forms a more nuanced picture. Sales including HEVs and PHEVs have surged to 25% of total industry sales. This growth in market share has been driven by carmakers such as Toyota and Honda.
‘These manufacturers are aggressively transitioning their lineups toward hybrid models, contributing to an increase of 4.1pp in overall electrification share from a year ago,’ said Tyson Jominy, senior vice president of data and analytics at J.D. Power
‘As an example, the 2026 model-year Toyota RAV4 unveiled this week will be offered exclusively as a HEV or a high-performance plug-in hybrid. This signals a deeper commitment to hybridisation, even as industry PHEV sales remain flat at just 2% of the market,’ he concluded.
