As we settle into 2025, dealers are facing a big decision: Should they focus more on selling used cars or lean into new vehicle sales? The answer isn’t easy because various market factors—from inventory levels to shifting consumer demand—are influencing sales strategies. With data from Lotlinx Vinsights, Kelley Blue Book, and other key industry sources, in this new & used car market forecast for 2025, let’s break down which strategy makes the most sense in today’s market.
The Case for New Cars: More Supply, Lower Prices, Strong Incentives
For the first time in years, the new car market is shifting into a buyer’s market. Inventory levels have increased, manufacturer incentives are more aggressive, and prices are beginning to level out.
- New Car Inventory on the Rise: January 2025 saw new vehicle inventory climb to a 96-day supply, which is a large increase from previous months.
- Manufacturer Incentives Are High: Automakers are rolling out incentives averaging $3,486 per vehicle, up from previous quarters. Brands like Jaguar, Lincoln, Mini, and Ford are offering deep discounts due to overstocked vehicles.
- Leasing is Making a Comeback: Leasing accounted for 44% of EV financing in Q3 2024 and 24% of all new vehicle financing—up from 20% a year ago.
- Price Reductions Are Finally Happening: Kelley Blue Book reports that new car prices, while still elevated, are down 2.2% month-over-month in early 2025, showing signs of softening.
The Case for Used Cars: Strong Demand, High Trade-In Value, and Financing Flexibility
While the new car market is gaining traction, used cars remain a staple for budget-conscious shoppers. However, challenges like tight inventory and elevated prices persist.
- Used Car Inventory is Still Tight: While supply has stabilized, the average used car listing price remains high at $25,128 as of February 2025. Limited trade-ins and fewer lease returns are keeping supply constrained.
- Older Used Cars Are in Demand: According to Experian Automotive, vehicles 9+ years old now account for 53.7% of used car loans, up from 42.5% in 2023. Consumers are turning to older models to find affordable options.
- Certified Pre-Owned (CPO) Cars Are Scarce: Off-lease vehicles—normally a major source of CPO inventory—are still in short supply, making it harder to stock desirable late-model used cars.
Financing Remains a Challenge: Interest rates are still high, and auto loan delinquencies have increased to 0.99% of outstanding balances. As a result, some lenders are becoming more selective, reducing subprime lending.
What’s the Better Sales Strategy? It Depends on Your Market
Both new and used cars offer opportunities, but the best strategy depends on your dealership’s location, inventory access, and customer base.
Go Heavy on New Cars If:
✔ You have strong relationships with OEMs to take advantage of incentives.
✔ Your customer base includes high-credit buyers who qualify for low-interest loans and leases.
✔ You can push leasing as an attractive alternative to financing.
✔ You have a solid digital marketing strategy to move high-inventory models quickly.
Lean into Used Cars If:
✔ Your market has strong demand for budget-friendly vehicles.
✔ You can source older, high-quality used cars to meet demand.
✔ Your financing team can work with subprime buyers who may struggle to qualify for new car loans.
✔ You can price competitively to capture price-sensitive shoppers.
Using AI for Smarter Inventory Management
Regardless of whether you focus on new or used cars, new and used car inventory management software like Lotlinx’s VIN View Optimizer (VVO) can help maximize profitability. AI can:
✔ Predict demand for specific vehicles in your region.
✔ Identify aged inventory and adjust pricing accordingly.
✔ Optimize digital advertising to reach in-market buyers.
✔ Provide insights to balance new and used car inventory effectively.
A Balanced Approach is Best
2025 is shaping up to be a dynamic year for auto sales. New car sales are rebounding thanks to higher inventory and incentives, while used cars continue to be a popular choice for budget-conscious buyers. The smartest dealers will embrace a balanced strategy—using new car incentives while ensuring used inventory meets demand.
As long as you stay data-driven and flexible, your dealership can thrive in this market and drive profitability in 2025. Contact us to see how we can use these insights to boost your bottom line.
For more insights on used car trends, check out our previous blog: Used Car Inventory Trends To Watch in January 2025