Here’s some mildly good news for dealers, as Cox Automotive adopts a little cautious optimism and hikes its U.S. light-vehicle sales forecast for 2025 to a range centered on 15.7 million, up slightly from an earlier forecast of 15.6 million in March.
That’s a little better than the previous forecast, but it still represents a drop in sales vs. 16 million in 2024. The drop is due primarily to the impact of tariffs on imported autos and auto parts, says Jonathan Smoke, chief economist for Atlanta-based Cox Automotive.
That impact hits, in earnest, in the second half of 2025, Smoke says during a recent webinar to announce the Manheim Used Vehicle Value Index for June 2025, to review first-half results in the new- and used-car markets and to forecast results through the end of the year.
“What we have seen so far is not catastrophic,” Smoke says. However, he says the first half is “not a good indicator of what comes next.”
Higher Prices
What comes next are higher prices. Tariffs could add an average of $5,700 to the price of vehicles imported from outside North America, and even an extra $1,000-plus on vehicles assembled in the United States, based on tariffs on imported parts.
“The impact of tariffs has not been felt. That will change in the second half of this year,” says Charlie Chesbrough, senior economist for Cox Automotive, in a separate webinar. “We expect the sales pace to slow, as fewer summer buyers remain after a frenzied spring and high prices and tight inventory grow as a headwind in the fall,” he says.
Used-vehicle prices at dealer-only wholesale auctions also remain high by pre-pandemic standards, even if values are down compared to a peak in 2022. For June, the Manheim Index is 208.5, up 1.6% vs. May 2025, and there is an increase of 6.3% vs. June 2024, Jeremy Robb, Cox Automotive senior director of economic and Industry insights, says in a webinar.
The Manheim Index is a single measure designed to track used-vehicle wholesale price changes, weighted for a changing mix of product segments and mileage, and seasonally adjusted. The index is calculated relative to a starting point, where January 1997 equals 100.
Reason for (Cautious) Optimism
While it lasted, there was a beat-the-tariffs sales rush in the new-vehicle market in March and April, which produced a sales spike that’s a factor in raising the full-year sales forecast, Cox Automotive experts say.
“Sales in March and April jumped, averaging a 17.5 million pace, the best we’ve seen since the spring of 2021. But that surge is now in the rearview mirror,” Chesbrough says. “May’s pace fell dramatically to just 15.6 million, and we expect June to continue this downward trend, and fall to 15.3 million, the slowest pace in 10 months.”
The monthly sales pace refers to the Seasonally Adjusted Annual Rate, usually called the SAAR. The SAAR is an estimate of what sales would be for the full year based on the latest monthly sales, adjusted for seasonal variations.
Pent-Up Demand
Another tailwind is leftover pent-up demand from pandemic-related shutdowns, and the extended supply-chain problems that cut into new-vehicle production, before inventory started to recover in 2023.
“While we expect demand to be challenged in the new market in the second half of this year as tariffs create production challenges and certainly don’t help affordability limitations, the backdrop to vehicle demand overall is that over 7 million sales didn’t happen that ordinarily would have, over the last four years,” says Smoke. “Our cars in use have never been older. Thanks to this pent-up demand, we won’t see the retail market collapse."
Another Dark Cloud
Besides tariffs, interest rates are another significant headwind for auto sales. Cox Automotive says the average new-vehicle auto loan rate was 9.51% in mid-June 2025, down only slightly vs. 9.65% in June 2024. Economists went into 2025 expecting multiple rate cuts from the Federal Reserve to stimulate the economy, but the Fed has put off rate cuts, in the face of a strong economy.
“Rates have moved in the wrong direction so far this year, and the Fed Funds rate remains in restrictive territory,” Smoke says. The Federal Funds rate is the bedrock rate at which banks lend each other money overnight to meet their reserve requirements. A “restrictive” rate makes it more expensive to borrow money.
“Auto rates are just below 25-year highs, and not likely to change much,” Smoke says. “It is highly unlikely that rates get any better before much later in the year, with the Fed waiting for data to make any further cuts,” he says.
Early Days
Exactly how much average transaction prices increase due to tariffs is still to be determined. The Cox Automotive sales forecast for 2025 is actually a range, from a low of 15.6 million to as much as 16.3 million, if tariff impact turns out to be minimal, Smoke says, adding the “baseline” forecast of 15.7 million is the firm’s most-likely scenario.
Meanwhile, Cox Automotive also shelved an earlier forecast with a lower range of just 15.3 million for full-year 2025.
“We’re in the early stage of seeing how these manufacturers deal with these added costs. But we do not believe the American consumer can absorb it all. Consumers today are more price- and payment-sensitive than they were in 2020 and 2021,” Smoke says.
