Good news for dealers as Cox Automotive applies some cautious optimism and hikes its U.S. light-vehicle sales forecast for 2025 to 15.7 million, up slightly from 15.6 million predicted in March.
While that’s a little better than the previous forecast, it still represents a drop in sales vs. 16 million in 2024, due primarily to the impact of tariffs on imported autos and auto parts landing in the second half of 2025, Jonathan Smoke, chief economist for Atlanta-based Cox Automotive, says in a June 25 webinar.
“What we have seen thus far has not been catastrophic. In fact, the second quarter will turn out to be a relatively strong quarter for the economy and the auto market. However, it represents a point of transition,” Smoke says.
“Before” and “After”
That transition is from “before” tariffs to “after.”
Cox Automotive estimates that the impact of tariffs later this year could add as much as $5,700 to the price of vehicles imported from outside North America, and even an extra $1,000-plus on vehicles assembled in the U.S., 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. “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 in the webinar.
Reason for (Cautious) Optimism
While it lasted, the beat-the-tariffs sales rush in March and April produced a sales spike that’s a factor in raising the full-year 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, this month, 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,” Smoke says in the webinar.
“Our cars in use have never been older. Thanks to this pent-up demand, we won’t see the retail market collapse,” he says.
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 from 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.”
Early Days
Exactly how much average transaction prices will increase due to tariffs is not yet known. 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 – but the “baseline” forecast of 15.7 million is the firm’s most-likely scenario.
Meanwhile, Cox Automotive also shelved an earlier sales 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.
