A Good News Story for Dealers Heading Into 2025

Every person who purchases a vehicle eventually arrives at a point of recognition: Now’s the time to pull the trigger and buy the car.

Perhaps the best news for dealers as we head into 2025 is that a confluence of conditions has flipped a switch: There are a lot of reasons why consumers, in this moment, appear to believe that it’s better to buy a vehicle now rather than delay their purchase.

On an industry call this week, which I’d encourage every dealer to check out, Cox Automotive chief economist Jonathan Smoke summed the situation this way: “Buy now or at least buy sooner rather than later seems to be the new marching cry.”

If we think about this past year, vehicle buyers had a lot of reasons to hold out. At various times, vehicle affordability, credit availability and the relatively steady decline in new/used vehicle prices were factors that suppressed retail sales. Right now, consumer concerns about rising inflation, the prospect of tariffs raising vehicle purchase costs and new federal fiscal and tax policy (including a possible sunset of tax credits that have spurred EV sales) serve as key catalysts for the current buy sooner rather than later mentality.

Smoke and others see sales momentum building in the market as we head into the new year. “The sun appears to be coming out, but there’s always a twist,” he shared on this week’s call. The optimism squares with what I’m hearing in my conversations with dealers. They’re feeling pretty good, even if profitability isn’t where they’d like it to be.

Generally speaking, the outlook for used vehicles is positive for 2025. Cox Automotive forecasts overall retail sales will grow 1.2 percent to 20.1 million next year. Analysts also noted a couple areas of potential pain or opportunity I thought I’d call out here:

CPO supply pressure. Cox Automotive forecasts that overall certified pre-owned retail sales volumes will be lower next year compared to this year—2.5 million total, down 1.6 percent. Constrained supply is the primary reason for the expected shortfall. The upshot for dealers: If you want to maintain or strengthen your CPO game, you’ll need to be ever-more proactive about sourcing the inventory outside of auctions, especially since they’re currently the go-to source for many dealers.

EVs. I was asked the other day how I’d describe dealers’ prevailing regard for used EVs. The answer: They’re wary, for a lot of good reasons, not the least of which is price volatility in the new EV market. Even so, you can’t deny that the market for used EVs is on the rise, especially as we face the prospect that EV tax credits might go away. I recognize that it can be hard for dealers who have avoided EVs, and don’t have a history of sales, to know how many to stock and how best to price them. If I fit this description, I’d be leaning into the live market data I get in my inventory management system for the answers. In many cases, dealers will find opportunities to step into, and build, their used EV sales share.

The Cox Automotive call also included another nugget about dealers being increasingly concerned about “competition.” To be sure, it’s a lower-level concern than the economy or interest rates. Still, I found myself scratching my head. Why would dealers be worried about the competition when sales volumes are good, the pool of potential buyers is growing and the number of dealers is basically the same?

I concluded the sentiment might be a form of projection—more revealing about the operational inefficiencies dealers know they should fix than anything else. If that’s the case, there’s no better time than right now to get on it.

Happy holidays and my best, warmest wishes to you/yours!