Auto dealers are navigating a dynamic used-car market lately, with demand reaching a four-year high for July and prices holding steady despite rising inventories, according to the July 2025 CarGurus Intelligence Report.

A key component for new opportunities is in the used market that some describe as a balancing act between high demand and tight supply of some of the most-wanted vehicles. Although overall used-vehicle inventory has remained at a three-year high, largely powered by franchise dealers, the most in-demand segment – 3- to 4-year-old vehicles – continues to be scarce.

The good news for dealers: That scarcity helps sustain higher prices, with average used-vehicle listing prices up 2.3% year-over-year and 0.4% month-over-month.

But even though some used cars aren’t in high demand, no used inventory remains on lots for long. Days-on-market is down 6% from a year ago, indicating that buyers remain highly active. Dealers moved more used cars in July than any July since 2021, as shown by the CarGurus Used Vehicle Demand Index, which rose 8.9% month-over-month and 3.6% year-over-year.

“With consumers putting macroeconomic concerns aside, we saw a strong summer surge in used-vehicle demand,” the report says.

New-Vehicle Market: Prices Stable Despite Tariff Pressures

New-vehicle inventories remain tight year-over-year, down 2.8%. Still, they have stabilized compared to earlier this year. Interestingly, new-vehicle listing prices have dropped 1.6% year-over-year, despite the effects of the April 2025 U.S. import tariffs.

“More than three-quarters of current new inventory now reflects post-tariff pricing,” the report notes, yet prices are still 1% below the pre-tariff average – a sign that OEMs may be absorbing cost increases or are strategically pricing 2026 model-year vehicles, which are beginning to arrive on dealer lots.

Highlights From the 2025 Mid-Year Auto Market Update:

• Tariff-driven buying spree tightened supply of budget-friendly new cars. Following the March tariff announcement, new-car sales jumped 48% year-over-year, creating a short-term buying spree. While the overall market has since returned to more typical seasonal trends, the sub-$30,000 segment is still feeling the squeeze; listings in that price range have dropped 15% since late March.
• New-car prices remain steady despite post-tariff inventory mix. Even though more than 60% of new vehicles on the market were added after tariffs took effect, the average list price has stayed relatively flat, hovering around $49,600.
• Leftover 2024 models may be a smart buy . Despite the spring sales boom, many dealers still have older model-year vehicles in stock. In fact, 2024 or earlier models now make up over 7% of new-car listings – the highest share since 2020 – and potentially offering shoppers better value.
• Used-vehicle availability is up, but true bargains are harder to find. Used-car supply has reached multi-year highs, but mid-age models – especially 3- to 4-year-olds – remain in short supply and carry higher price tags due to pandemic-era production lags. For buyers looking under $20,000, available inventory is typically older and has more mileage. Still, fuel-efficient vehicles – including hybrids, EVs and small gas-powered cars – are in strong demand across all age brackets.
• Hybrids lead the way in both sales and savings. Hybrid vehicles have been a standout performer in 2025. Thanks to increased buyer interest and a drop in average list prices of around $1,400 compared to last year, retail hybrid sales are up 43% year-over-year.

More information about this report can be found here.