Car shoppers could be in for a smoother ride in 2025—especially if they're eying new vehicles.

Market trends have lately been shifting in drivers’ favor, according to Cox Automotive, a software firm serving the auto industry, and that momentum is expected to carry into next year.

Dealerships are offering larger incentives to buyers, who are having an easier time accessing loans and credit, Cox said as part of a year-ahead outlook presentation Tuesday. Increases in new car prices have recently tapered off as the supply of new vehicles grows, said Charlie Chesbrough, a senior economist focused on the new-vehicle market.

“The seller strength has eroded,” Chesbrough said. “Affordability is improving in the marketplace and trend lines suggest it may have further to go in 2025.” (Prices for used cars, however, aren’t expected to fall further due to tight inventory, Cox said.)

The indexes for both new and used vehicle prices fell year-over-year last month, according to the Bureau of Labor Statistics’ consumer price index report, while rising from October levels. Americans spent enough on cars to push retail sales above expectations for November.

Here’s a look at four trends expected to drive the car market in 2025. 

Prices are leveling off for new cars. 

The number of new vehicles available in the U.S. has been growing for nearly three years, easing price growth, according to Cox. 

Meanwhile, prices are coming down. The average new vehicle price is about $49,000 today, down from $50,300 in June of 2023, according to Cars.com (CARS), a digital marketplace for cars. Dealers have offered more and more incentives—such cash rebates and low-cost financing—over the past two-plus years, according to Cox data.

Incentives amounted to 8% of the average transaction in November, according to Cox; they were around 2% in 2022. (They were closer to 10% before the pandemic.)

More compact models are on the way.

Drivers appear to be leaving the lot in smaller versions of their dream cars as they work to stay within their budgets, Chesbrough said.

The share of compact vehicles sold has grown, Cox said. Growth occurred in compact cars, compact SUVs and subcompact SUVS, which sold for an average of $33.570 in 2024, according to Cox; The average price for non-electric, traditional vehicles was a bit over $48,000 as of November.

Shoppers seeking out a lower price point should have options in 2025. The number of new vehicles available for less than $30,000 in November grew 42% from a year earlier, Cars.com said.

Used-car prices are unlikely to fall amid tight supply.

Dealers are unlikely to cut prices for used cars now that they are harder to come by, Cox said.

Dealerships get a significant share of their used inventory by scooping up cars with expiring leases, said Jeremy Robb, senior director of economic and industry insights at Cox. The volume of leased cars plunged in 2021 and 2022 when overall car production was down because of pandemic-related disruptions, and the number of cars exiting a lease and available for sale is not expected to normalize until at least April of 2026, Robb said.

Meanwhile, prices for used cars have risen nearly every week since September, he said.

The future is bright for electric vehicles.

Electric vehicle prices are up 1.4% year-over-year, but dealers have general offered bigger incentives on these cars for several months now and the discounts aren't expected to disappear, Cox said. The average incentive now amounts to nearly 15% of the average price, the firm said.

“Incentives and discounts have played a major role in lowering EV prices and will continue to do so,” said Stephanie Valdez Streaty, director of industry insights at Cox.

EV costs may come down some because the batteries they rely on are expected to become less expensive to produce, Valdez Streaty said. 

Electric vehicles may fare better than some expect should incoming President Donald Trump follow through on his promise to curtail incentives for them, Cox economists said. The economists said policy changes are unlikely to occur until the second half of 2025, and states may continue offering benefits to those buying EVs.