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As we look ahead to the year 2025, there are several potential changes on the horizon for car buyers. From economic factors that could impact purchasing power to shifts in the electric vehicle market and changes to the car buying process, it’s important for consumers to stay informed about what may be coming down the road. Here are four possible changes that could affect car buyers in 2025.
Fed Cuts Could Boost Purchasing Power
One significant factor that could impact car buyers in 2025 is the potential for Federal Reserve interest rate cuts. According to Mint, market pricing projects 155 basis points of cuts in 2024 and 2025. These cuts could have a positive impact on the average buyer’s purchasing power.
Michael Quigley, co-founder at Impel, explains, „Given increased fears of a recession and pressure on the Fed to lower interest rates, purchasing power of the everyday car buyer is likely to rise in 2025. A 1.55% decrease in interest rates could decrease the cost of a $30,000 car loan by almost $1,000 annually.“
There Could Be Changes to Electric Vehicles, Too
For those considering purchasing an electric vehicle (EV), there may be some changes on the horizon. Gartner predicts that EVs will continue to gain popularity, with an estimated 20.6 million new units shipped in 2025. This increase in supply could potentially lead to lower prices for EVs.
However, there is a potential caveat to this trend. Quigley notes, „The EV landscape could shift with the outcome of the 2024 US election as a Republican win could lead to the reduction/elimination of federal tax credits for EVs.“ Currently, most EVs qualify for up to a $7,500 credit, which helps offset the higher initial cost of these vehicles.
The Car Buying Process Will Likely Shift Toward Online Purchases
With the rise of online car shopping platforms like CarMax, more consumers are opting for the convenience of purchasing vehicles online. According to a 2023 Cox Car Buying Report, 71% of people prefer a combination of online and in-person shopping when buying a car.
Quigley adds, „Nearly 80% of buyers visited 3rd-party websites like Autotrader, Kelley Blue Book, and Edmunds.com during their buying journey.“ This shift towards online car shopping is likely to continue in 2025, as more consumers seek out the convenience and transparency that online platforms offer.
Autonomous Vehicles Will Continue To Gain Popularity
Another trend that could impact car buyers in 2025 is the continued growth of autonomous driving technology. Quigley predicts, „We will see continued growth in autonomous driving technology as L3 and L4 autonomous driving systems become more common by 2025 in Europe and North America.“
According to a McKinsey report, these advanced autonomous driving systems could lead to higher initial costs for vehicles but lower long-term maintenance and insurance costs due to increased efficiency and safety. While autonomous vehicles are still relatively new to the market, their growing popularity could have an impact on pricing and consumer preferences in the coming years.
In conclusion, the landscape for car buyers in 2025 is likely to see several significant changes. From potential interest rate cuts that could boost purchasing power to shifts in the electric vehicle market and the continued growth of online car shopping, consumers should be prepared for a dynamic and evolving market. By staying informed about these potential changes, car buyers can make more informed decisions when it comes to purchasing their next vehicle.