2024: A Return to Normalcy

But that points to challenges for dealers in 2025

On a monthly basis, the State of the Dealer Report strives to answer the question all automotive dealers are wondering: "Is it going to be harder or easier to sell a car in the next 30 days?" But the emd of the year also allows us to reflect on a longer time horizon and put the automotive marketplace into a broader context. This is especially relevant given the various shocks to the system that have played out over the past several years and the effects that they have had on the supply and demand picture in that timeframe.

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2024 Recap

Over the course of the year, vehicle inventories rebounded, but vehicle movement, while up, did not match the growth trajectory seen in supply. In the case of new vehicles, inventory counts are now approaching pre-pandemic levels after several years of supply chain-challenged declines and a long road of recovery. 

That return to more normal levels, however, comes with some cautions— most notably in the form of lower turn rates and increasing days-to-move. The degradation of these vehicle velocity metrics points to longer-term challenges in the sales environment for dealers as consumers have more choices in the marketplace.

Price of New Vehicles stays at or above an average of $50k

One notable distinction from past economic circumstances of growing supply and lagging demand is that prices of new vehicles have remained elevated, staying at or above an average of $50K.

This reflects several related factors–general inflation and its impact on OEM production costs, the discontinuation of lower-end models to maximize profits on scarce parts during the aftermath of the pandemic, and the emphasis on higher-end trims for similar reasons. At a time when economic uncertainty is increasing, and wealth bifurcation is widening, this poses greater challenges for consumers–particularly at the lower end of the economic scale.

The Used Market is experiencing similar dynamics, with supply climbing and demand not keeping pace, particularly in the latter half of 2024.

And while prices are following a more expected pattern—dropping from almost $33K in 2022 to less than $26K at the end of 2024—

much of this has to do with an older inventory profile as a shorter supply of new cars from 2021 and 2022 flow back into the Used market.

With all that said, dealers are facing a wider array of challenges in selling vehicles than they did in the past several years when the balance of vehicle inventory and movement favored the latter. In such an environment, the need for a dealer to prioritize and appropriately support its inventory is all that much more important.

Ensuring that vehicles are visible to in-market shoppers and marketed in a targeted fashion is key to selling them in a timely and efficient manner.

Learn More About Automotive Market Dynamics Using the Resources Below:

1. Rethinking Traditional Car Dealership Marketing Strategies & Why You Should Act Now
2. AI And The Evolution Of Dealership Marketing
3. Dealership Video Marketing Strategies To Drive More Traffic

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2025 Outlook

While there is no crystal ball that can entirely predict how the coming year will play out, there are several storylines that will have a major impact on the marketplace in general and a dealers’ ability to sell within it in particular. Many will be affected by the change in presidential administrations early in 2025.

Tariffs may increase the price of imported vehicles and parts.

The threatened implementation of tariffs by the incoming Trump administration will likely make purchasing vehicles produced outside of the United States more expensive.

And even for those vehicles produced domestically, tariffs on imported parts are likely to raise prices at some level across the board. In an era of already-elevated prices, with many discontinued lower-end models now unavailable, this will further exacerbate the difficulty in affording new vehicles, particularly for those at the lower end of the socioeconomic scale.

Impacts of policy shifts on EVs

The change in administrations will also come with a significant shift in policy towards electric vehicles, with federal subsidies for many models likely to go away. In the short-to-medium-term, this will lead to further delays in EV investment and innovation by the OEMs, which will likely help dealers that have been struggling to sell those vehicles and to reprioritize higher-profit ICE vehicles such as full-size trucks and SUVs.

Slowly declining interest rates

While interest rates are likely to decline, the pace at which that will happen is projected to be slower than originally anticipated due to stubbornly high inflation. Relief in the form of lower monthly payments is, therefore, likely to be overcome by the other factors noted above.

WITH THESE ANTICIPATED DYNAMICS AT PLAY, DEALERS WOULD BE WELL SERVED TO COMMUNICATE WITH CONSUMERS IN WAYS THAT HIGHLIGHT:

Transparent pricing, including available discounts.

For a consumer searching for a workable financial situation, a dealer showing reduced pricing will almost always have an advantage over ones that do not.

Product enhancements.

Showing consumers upgraded features and capabilities of a new model year will help support higher prices for new offerings in comparison to the cost of previous purchases.

Available incentives.

Listing cash back, APR and lease offers on dealers’ vehicle detail pages is a key advantage in a high-supply, high-price selling environment.

Extended loan periods.

Making monthly payments more affordable may be the key between a current purchase and a delayed or deferred one.