Consumer spending on new vehicles could be tariff-driven, or it could be the right time for some buyers to take advantage of great sales offers.
Despite a 1.1% rise in new-vehicle retail sales, consumers spent a record amount on new vehicles in May 2025, influenced by tariff-driven price increases. The new vehicle sales figures can simply be attributed to the additional sales day in May 2025 compared to May 2024, which means sales were flat year-over-year. Some automakers raised prices as a response to threats of tariffs, but many have not.
What drove the flat sales?
Vehicle sales surged in March and April. This could have been due to the fear of new tariffs raising prices beyond affordability, but it could also have been a planned purchase for some consumers who received their income tax returns during this time. That said, the surge in sales appears to be accelerated as many consumers look to avoid the challenging prices that will come if the tariffs are imposed on the automotive industry. Sales increases in March and April translated to nearly 149,000 additional vehicles than expected being sold, which shows a re-timing by many shoppers.
Higher vehicle prices haven’t materialized yet
The threatened tariffs haven’t translated to higher vehicle prices for most automakers yet. Many have explicitly committed to maintaining stable vehicle prices in the near term, ensuring consumer confidence in their brands. Consumer spending on new vehicles showed a rush to showrooms in the spring, which caused the average new-vehicle retail transaction to be higher than normal, but that led to a leveling of this price in May. The average price in May, when the month is over, should be $45,462, which is an increase of $649 compared to May 2024 but a decrease of $592 compared to April.
Incentives have fallen
The $500 customer cash or $2,500 rebate on a new vehicle doesn’t mean as much when prices are higher than they do at other times. The average automaker incentive per vehicle is tracking to reach $2,563 in May, which is a $200 decrease from April and $143 less than a year ago. As interest rates increase, more shoppers should be looking for promotional financing offers that they can qualify for to pay much less in interest and fees over the course of a vehicle’s loan term.
Consumer spending is up
New vehicles are still being sold at a strong pace, which should allow May 2025 to be the highest selling month in terms of total dollars compared to any May on record. It could also be the fourth-highest of any month on record. Consumers are currently tracking to spend nearly $53.8 billion on new vehicles in May, which is 7% higher than last year. This is the result of the strong sales pace and high average transaction prices.
Fleet sales are going the other direction
Consumer spending is much more profitable for automakers than fleet sales. For this reason, manufacturers are focused on retail buyers, leaving fleet sales with a projected decline of 7% compared to the same month last year. Fleet shoppers are still an integral part of the automotive world; but don’t have the same positive impact on the bottom line for dealerships and automakers as retail buyers.
Used prices are going up again
We might not see the skyrocketing prices that were part of the COVID-19 pandemic of 2020, but the average used vehicle price is up $130 from the same month a year ago. This means the average price for a used vehicle has now reached $29,168. This increased price reflects the reduced supply of late-model vehicles and much smaller discounts offered for these vehicles. The good news for some consumers comes in the form of increased trade-in value. When used vehicle prices increase, the average trade-in value also increases, translating to better figures when trading for a new model.
Tariffs, will they really happen?
The effects of tariffs on the economy remain uncertain, mostly because they don’t seem to be implemented, but simply used as a threat to get some countries to do the bidding of the current administration. Still, tariffs on imported vehicles and parts will increase costs for many manufacturers but might not impact all automakers the same way.
Consumer spending for new vehicles is on the rise in May, which shows positive growth, despite the overall sales figures remaining basically the same as a year ago. Is now the time for you to buy a new vehicle? Are you concerned about tariffs significantly increasing the price of your next vehicle?
This post may contain affiliate links. Meaning a commission is given should you decide to make a purchase through these links, at no cost to you. All products shown are researched and tested to give an accurate review for you.