Rising US new-vehicle sales enabled by discounts

28 January 2025

The US is forecast to see new-vehicle sales grow in January, enabled by discounts from retailers and manufacturers. In its latest outlook, J.D. Power sets out its expectations for January 2025.

Including retail and non-retail transactions, new-vehicle sales are projected to reach 1,105,894 units in the US across January. This will equate to a 4.4% increase from January 2024. This month has 25 selling days, the same as 12 months ago.

The seasonally-adjusted annualised rate (SAAR) for new-vehicle sales is expected to reach 15.6 million units. This is up 0.6 million units from January 2024. Retail sales of new vehicles are expected to reach 904,239 units, a 4.8% increase from January 2024.

‘January’s SAAR forecast of 15.6 million is up 0.6 million from last January, however, it is considerably lower than December’s 17.1 million SAAR,’ explained Thomas King, president of the data and analytics division at J.D. Power.

Comparative sales performance

The decline from the December sales pace is notable. However, it is important to recognise that January is typically the lowest sales volume month of the year. As such, this month’s performance is generally not indicative of the long-term outlook for the industry. December’s strong sales pace was fuelled by manufacturer incentives aimed at clearing 2024 model-year inventory.

Additionally, speculation on changes to the availability of government rebates for electric vehicles (EVs) impacted performance. This encouraged many purchases that would otherwise have occurred at some point in 2025. These factors explain the relative strength of December and the relative softness of sales pace in January.

‘Nevertheless, consumers will spend more money buying new vehicles this January than any other January on record. This notable result shows that retail sales are rising while average transaction prices are declining only modestly,’ King said.

Highest January on record

The average retail transaction price for new vehicles is trending toward $44,636 (€42,837), down 0.5% and $238 from January 2024. Buyers are on track to spend nearly $38.5 billion on new vehicles this month. This equates to year-on-year growth of 5.3% and lines up the highest January on record.

Inventory at dealerships continues to rise, reaching a new high for the post-pandemic period. Retail inventory is projected to be 2.2 million units, a 3.7% improvement from December and 31.1% up on January 2024. Rising inventory is leading to deeper discounts from both manufacturers and retailers, although some high-volume vehicles remain in short supply.

Total retailer profit per unit, including vehicles gross plus finance and insurance income, is expected to hit $2,272. This is down 13.5% from January 2024. The decline is primarily driven by rising inventory levels, with fewer vehicles selling above the manufacturer's suggested retail price (MSRP). So far in January, only 11.8% of new vehicles have been sold above MSRP, down from 20.4% in January 2024.

Total aggregate retailer profit from new-vehicle sales is projected to be $2 billion, down 8.4% from January 2024.

Manufacturer discounts are continuing to increase. The average incentive spend per vehicle is on track to reach $3,226, an increase of 29.3% from January 2024. Expressed as a percentage of MSRP, incentive spending is currently at 6.5%, an increase of 1.3 percentage points (pp) from a year ago.

Spending decreased by $130 per unit from December 2024. The drop from December reflects normal seasonal patterns as year-end promotional events conclude.

Leasing accounts for more sales

‘One of the drivers of higher incentive spending from a year ago is the increased availability of the discounting of lease payments. This month, leasing is expected to account for 24.3% of retail sales, up from 22.6% in January 2024,’ King added.

‘While attractive lease offers are driving an increase in the lease mix, the industry continues to contend with the lingering effect of reduced leasing activity from three years ago. The number of leases set to expire this month is down 17.6% from December and 36.7% lower than a year ago,’ he said.

Average monthly finance payments this month are on pace to be $734, an $11 improvement from January 2024. The average interest rate for new-vehicle loans is expected to be 6.7%, falling 16 basis points from a year ago (one basis point is equal to 0.01%).

Lower trade-in equity

So far in January, average used-vehicle retail prices are $27,794, down $345 and 1.2% from a year ago. The decline in used-vehicle values is translating to lower trade-in equity for owners. Values are now trending toward $7,636, a $538 decline from a year ago.

‘The market dynamics in January are consistent with those observed throughout 2024: rising sales enabled by rising discounts from manufacturers and retailers. This dynamic is expected to persist throughout 2025,’ King said.

‘Several factors could disrupt this dynamic, including the potential for changes to federal EV tax credits, fuel economy standards and new import tariffs. However, demand for vehicles remains strong for now and the overall health of the new-vehicle market is good. This is evidenced by the simple fact that consumers will spend more money on new vehicles this January than ever before,’ he concluded.

The details

• The average new-vehicle retail transaction price in January is expected to reach $44,636, down $238 from January 2024. The highest for any month, $47,329, was set in December 2022.
• Average incentive spending per unit in January is expected to reach $3,226, up $730 from January 2024. Spending as a percentage of the average MSRP is expected to increase to 6.5%, up 1.3pp from January 2024.
• Average incentive spending per unit on trucks and SUVs in January is expected to be $3,410. This is up $751 from a year ago, while the average spending on cars is expected to be $2,383. This is up $546 from a year ago.
• Retail buyers are on pace to spend $38.5 billion on new vehicles, up $1.9 billion from January 2024.
• Trucks and SUVs are on pace to account for 81.5% of new-vehicle retail sales in January.
• Fleet sales are expected to total 201,655 units in January, up 2.5% from January 2024. Fleet volume is expected to account for 18.2% of total light-vehicle sales, down 0.3pp from a year ago.
• Average interest rates for new-vehicle loans are expected to be 6.7%, down 16 basis points from a year ago.

Taking advantage of incentives

‘EV sales were strong in December, reaching a monthly high retail share for the year at 10.5%. However, overall EV sales averaged 9.1% for the year, growing just 0.7p from 2023,’ outlined Elizabeth Krear, vice president of the EV practice at J.D. Power.

‘The strength in December reflects the combined effect of shoppers accelerating their EV purchase to ensure they can take advantage of federal tax incentives, combined with enhanced EV incentives from manufacturers,’ she added.

In 2024, shoppers looking for mass-market vehicles had more EV options to choose from as EV market coverage increased to 59% from 35%. Consequently, the growth in the overall EV market share was driven by mass-market EVs, which were up 58%.

‘While the percentage of new-vehicle shoppers who said they were ‘very interested’ in purchasing an EV declined in 2024, a solid December preceded a strong January in which the percentage reached a two-year high of 29%,’ Krear commented.

‘It is notable that December’s average transaction price for battery-electric vehicles (BEVs) was $45,700, while hybrids and gas-powered vehicles combined for an average transaction price of $46,500. BEVs, inclusive of federal tax incentives, transacted $800 less than non-BEVs in December. These dynamics indicate that more shoppers are making EV decisions based on EV availability and pricing, knowing that the industry may be losing the federal incentive,’ she concluded.