Don’t let the recent news reports saying auto sales are on a downward spiral spook you. Retail demand for new vehicles remains resilient despite a flattening total sales volume and growing uncertainty around tariffs, according to a joint May 2025 forecast from J.D. Power and GlobalData.
Total new-vehicle sales, including fleet, are expected to reach 1.49 million units this month (May 2025), essentially flat compared with May 2024. When adjusted for one extra selling day this year, sales volume represents a 3.4% year-over-year increase. The seasonally adjusted annualized rate (SAAR) is forecast at 15.6 million units, down slightly from 15.7 million a year ago.
Analysts looking into their crystal balls don’t expect a boom, but they do see rising sales ahead. Retail sales are projected to increase 1.1% year-over-year to 1.24 million units. Without adjusting for selling days, retail gains appear stronger, increasing 5% over last May.
Post-Tariff Surge Settles, but Demand Holds
As reported in WardsAuto, March and April saw an artificial boost in sales as consumers rushed to avoid possible price hikes stemming from proposed tariffs. Roughly 149,000 additional units were sold during those two months due to advance purchasing, which now serves as a headwind for May and beyond, says Thomas King, president of the data and analytics division at J.D. Power.
Stable Pricing – for Now
Despite rising production costs due to tariffs on imported vehicles and parts, many automakers are holding prices steady – at least for now. The average new-vehicle retail transaction price in May is expected to reach $45,462, up 1.4% from a year ago but down 1.3% from April’s peak. Manufacturer incentives are easing slightly, averaging $2,563 per unit, down $200 from April and $143 below year-ago levels. Incentives now represent about 5.1% of MSRP, a modest drop from last year.
Dealer Profits Strong, but Signs of Normalization Emerge
Dealers’ profits should rise as the summer unfolds, says King. Per-unit profit, including F&I income, is expected to hit $2,502 – up $98 from last May but down $29 from April.
Total aggregate retailer profit from new-vehicle sales is projected to reach $3 billion this month, a 9.8% increase over last year. In fact, May 2025 is on pace to set a new monthly spending record, with consumers expected to spend $53.8 billion – up 7% year-over-year and the fourth-highest monthly total on record.
Affordability Concerns Grow
Still, high prices and interest rates continue to pose challenges for shoppers. The average monthly loan payment is projected at $748, an all-time high for May. The average APR stands at 6.93%, slightly lower than it was a year ago. Fleet sales are expected to drop 7% year-over-year as automakers prioritize higher-margin retail deliveries.
Used-vehicle prices are also expected to put a strain on budgets. The average used-vehicle price has edged up to $29,168, a $130 year-over-year. As a result, average trade-in equity has risen to $8,292, up $415 from last year. The bad news: The share of new-vehicle buyers with negative equity is also rising, now reaching 24.4%.
Tariffs Could Reshape Second-Half Strategy
Looking ahead, J.D. Power reports that higher spring sales could dent summer deals. And, of course, tariffs are another wildcard.
New import tariffs are expected to raise the average vehicle production cost by $4,275 but, as previously reported in WardsAuto, the impact varies widely by manufacturer and model. Domestically built vehicles face minimal changes, while some imported models will see cost spikes of up to 25%.
To date, many manufacturers are holding prices steady. Some, such as Ford, are even offering “employee pricing” discounts. King suggests that more noticeable price increases may begin surfacing in June and July, with full tariff-related pricing adjustments unlikely before the end of the year.
