The automotive market is entering a pivotal transition period in late 2025, with three major forces reshaping vehicle affordability and availability: the impending expiration of federal EV tax credits, ongoing import tariff impacts, and shifting inventory levels between new and used vehicle segments. MotorVero's latest market analysis reveals how these factors will affect car shoppers in the coming months.
--FIRST CAR LIST HERE--
Key Market Indicator
New vehicle prices showed minimal overall increase (+$97 average) in H1 2025, but tariff impacts varied wildly by origin country - from $6,000 increases on UK imports to $1,293 drops on Chinese-made vehicles.
The EV Tax Credit Countdown: What Shoppers Must Know Before September 30
The "One Big Beautiful Bill Act" has set an expiration date for the federal electric vehicle tax credit program that has shaped the EV market since its inception. After September 30, 2025, buyers will no longer qualify for:
- Up to $7,500 in tax credits for qualifying new electric vehicles
- Up to $4,000 in tax credits for eligible used EVs
Our research shows these incentives have been transformative:
- 52% of EV owners cited the tax credit as a primary factor in their purchase decision
- EV model availability grew 38% year-over-year (72 models available in 2025 vs. 52 in 2024)
- The credit helped bridge the $16,000 average price gap between EVs and gas-powered vehicles
- --TOP ADVERTISEMENT HERE--
Automaker Responses to the Credit Phase-Out
Manufacturers are implementing creative strategies to maintain EV sales momentum:
- Honda's Prologue lease: $3,899 initial payment + $419/month for 24 months
- 0% financing offers from multiple brands on select EV models
- Increased dealer incentives to move 2024-2025 model year inventory
The average new EV price of $65,000 remains a significant barrier without federal support, suggesting we may see:
- More manufacturer rebates in Q3 2025
- Increased leasing options with buyout incentives
- Bundled charging credits or free maintenance packages
Import Tariff Impacts: How Country of Origin Affects Vehicle Prices
The first half of 2025 saw dealers aggressively stockpiling inventory ahead of tariff implementations, leading to strong sales but creating an impending supply crunch. Our data reveals dramatic price variations by manufacturing origin:
--SECOND CAR LIST HERE--
Price Changes by Manufacturing Country (H1 2025)
- United Kingdom: +$5,987 average increase
- European Union: +$2,512 average increase
- Japan: +$1,237 average increase
- Mexico: +$676 average increase
- United States: -$191 average decrease
- Canada: -$704 average decrease
- South Korea: -$508 average decrease
- China: -$1,293 average decrease
These disparities are creating distinct market segments:
- Budget vehicles (under $30K) now represent just 13.6% of inventory
- Only 2 models in this segment (Toyota Corolla, Honda Civic) are U.S.-made
- Used car prices rose 1.6% in Q2 as demand shifted to pre-owned market
- --FIRST CONTENT ADVERTISEMENT HERE--
Second Half 2025 Forecast: What Buyers Can Expect
Three converging trends will define the auto market through December 2025:
1. New Vehicle Market Squeeze
With pre-tariff inventory depleted and production slowing, we anticipate:
- Reduced manufacturer incentives on gas-powered vehicles
- Longer loan terms becoming standard (84+ months)
- Increased focus on higher-margin luxury vehicles
2. Used Market Volatility
The March-April sales surge created a wave of trade-ins, but:
- Demand is concentrated in the $20K-$30K price bracket
- Late-model, low-mileage inventory is moving quickly
- Prices may stabilize but aren't expected to decrease significantly
3. Financing Landscape Shifts
Lenders are adapting to the new market reality:
- Ford's shift from employee pricing to "zero, zero, zero" offers
- Flat interest rates despite Federal Reserve policies
- Increased subprime lending in the used vehicle market
- --THIRD CAR LIST HERE--
Smart Buying Strategies for Late 2025
Based on current market trajectories, we recommend:
For EV Shoppers
- Act before September 30 to lock in tax credits
- Compare lease vs. purchase options carefully
- Negotiate charging infrastructure perks
For Budget-Conscious Buyers
- Consider certified pre-owned alternatives
- Focus on U.S.-made vehicles to avoid tariff premiums
- Get pre-approved financing before visiting dealers
For Luxury/Non-Urgent Buyers
- Monitor Q4 inventory clearance events
- Consider European imports before tariff increases fully take effect
- Explore manufacturer captive financing deals
- --SECOND CONTENT ADVERTISEMENT HERE--
Market Outlook: When Will Conditions Improve?
While 2025 presents challenges, several factors could ease pressure in 2026:
- Potential tariff adjustments after elections
- New EV production facilities coming online in North America
- Possible return of state-level EV incentives
- Normalization of used vehicle supply chains
MotorVero will continue monitoring these developments with weekly market updates to help consumers navigate this complex automotive landscape.
--FORTH CAR LIST HERE--
