It's been more than a week since U.S. Federal Reserve Chair Jerome Powell’s announcement that interest rates would remain steady within the 4.25%-4.50% range, where they have remained since January of this year.
Cox Automotive Chief Economist Jonathan Smoke warns that the Fed’s stance may further slow economic momentum, push inflation higher and increase joblessness. President Donald Trump reacted to the news with fiery remarks, asserting the decision is costing the U.S. “billions.”
“Welcome to a long, slow summer of waiting,” Smoke says in a public statement. “This is not a recipe for sustained healthy demand for vehicles – especially new ones.”
Incentives aside, car buyers remain hesitant amid inflation concerns, tariff-driven price hikes and high borrowing costs. Cox Automotive data shows:
• Average new-vehicle loan rates now sit at 9.52%, up 84 basis points since January.
• Used-vehicle loan rates have climbed to 14.18%, nearly reaching the 25-year peak recorded in February.
Smoke also notes lenders are tightening credit standards in response to rising default risks and broader economic uncertainty.
“Relief on auto loan rates is unlikely before the end of the year,” Smoke says. “Longer-term bond yields are also at risk of moving higher as the government ramps up Treasury issuance to cover growing deficits.”
According to projections by J.D. Power and GlobalData, new-vehicle sales in June 2025 – including both retail and fleet sales – are forecast to hit 1,247,900 units. While this marks a 2.5% year-over-year gain, it's important to note that June 2025 includes two fewer selling days compared to last year. Adjusting for that discrepancy, actual performance reflects a 5.4% decline.
The seasonally adjusted annualized rate (SAAR) for new-vehicle sales is expected to rise modestly to 15.0 million units, a slight increase from June 2024.
Looking at broader trends, total new-vehicle sales for the first half of the year are anticipated to reach nearly 7.77 million units – just 0.4% higher than the same period in 2024. Second-quarter sales are projected to rise 2.5% year-over-year to approximately 4.18 million units.
On the retail side, June 2025 sales are forecast at 1,016,800 units, reflecting a 6.7% bump compared to the same month last year. However, once adjusted for selling days, that translates into a 1.5% decline. For the first six months of 2025, retail deliveries are expected to hit 6.67 million units, up 7.5% year-over-year.
“June sales are subdued, with the sales pace falling to its lowest level in the past 12 months,” says Thomas King, president of the data and analytics division at J.D. Power. “However, care needs to be taken when interpreting June results, as they are not fully indicative of the underlying demand for new vehicles.”
He outlines three main factors affecting June performance: lingering effects of a 2024 dealer software outage, a pull-forward sales effect earlier this year tied to tariffs, and weaker-than-expected discounts due to pricing pressure.
“It should also be noted that there has yet to be a material increase in new-vehicle MSRPs (manufacturers’ prices) due to tariffs. While exceptions exist, MSRPs are generally remaining stable,” says King. “Changes in the average transaction price of new vehicles are driven by the combination of manufacturer discounts, retailer profitability and the mix of new vehicles being sold.”
The average transaction price for a new vehicle is expected to reach $46,233 in June – a $1,400 jump over last year, and $77 higher than May.
Incentive spending is also climbing modestly. Automakers are forecasted to offer an average of $2,727 per vehicle, which is up slightly from both the prior month and June 2024. However, when expressed as a share of MSRP, incentives have dipped to 5.4%.
Retailers continue to benefit from robust pricing, with profit per vehicle (including F&I income) expected to reach $2,380 – up from last June but slightly down from May. Altogether, June’s total retail profit is projected to hit $2.3 billion, a 3.1% increase from a year earlier.
“Despite the muted sales pace, strong average transaction prices mean consumers are on track to spend nearly $45.0 billion on new vehicles this month – 4.3% higher than a year ago and the fourth-highest on record for the month of June.”
