Today's economy is shifting the calculus of the car search.
With changes at the federal level and a sustained demand for electric vehicles (EVs), buying a car takes more research than ever. Industry experts say that 2025 isn’t a terrible time to buy a car, considering that prices aren’t expected to drop back down to pre-pandemic levels anytime soon. But it’s getting more difficult than ever to abide by the rule of thumb not to spend more than 10% of your income on car expenses.
Once you’ve decided it’s time to buy, you first need to resolve the classic dilemma: used or new?
A Complicated Calculus
Before the new administration’s tariffs went into effect in April, inventory was up for new cars, meaning prices had stabilized since the supply-chain crises of the pandemic. Now, experts are predicting we’ll see a drop in the new car supply (and the inevitable increase in prices) similar to what we saw during the pandemic. As the new car supply takes a hit, demand for used cars is expected to rise as well. Plus, automakers made 8 million fewer cars during 2020 and 2021 than they would have in pre-pandemic times, so those are 8 million fewer used cars to hit the market today.
All of this makes the math trickier for thrifty buyers. Here are some factors to consider as you weigh buying used vs. new in 2025.
- Buy sooner rather than later. According to Kelly Blue Book, the effects of the tariffs will trickle down to individual carmakers and dealers at different times, but everyone will be affected. Keep an eye on the prices in your area, and know that every month will probably be the cheapest month to buy a car for the foreseeable future.
- Make the most of the car you have to sell. The silver lining here is that, if you have a car that still has some miles on it, you’re likely to get a good price when you trade in, and especially if you’re willing to go through the hassle of selling it privately. With used cars in such high demand, dealers are more likely to offer you a trade-in even for cars with over 150,000 miles.
- EV vs. Hybrid vs. Gas? If you’re leaning toward buying new, you could still save money on an EV. From January to September 2024, Americans saved $2 billion on over 300,000 electric and hybrid vehicles, thanks to significant tax incentives. At the time of writing, the federal government was still offering a tax credit for EVs. The incentive puts $7,500 back into the pockets of buyers of new EVs priced under $80,000. For pre-owned EVs and hybrid vehicles, the credit is up to $4,000. Check fueleconomy.gov for the latest updates on the status of the incentive program and to search for eligible vehicles.
- Don’t rule out a used hybrid or EV, but beware. Buying a used hybrid or electric vehicle is arguably the most environmentally-friendly choice. And since hybrid cars, in particular, have been on the market since 2000, they’re out there on used car lots–but they’re also in high demand. When considering buying a used EV, the most important consideration is the life of the battery. Understand the charging capacity and where the battery is in its life cycle, and be sure to factor battery replacement timing into the total cost.
Pay Special Attention for Flooded Cars
As more extreme weather brings higher flood risk to many parts of the U.S., cars become a casualty. Few drivers carry flood insurance, as it’s prohibitively expensive, but even a partial inundation can total a car, or set it up for expensive repairs a few years down the road. When car owners offload these flooded cars onto auctions and dealers, they often get transported many miles from the site of the flood. As a result, used car buyers are seeing more and more cars with flood damage on the lot–whether or not they realize they’re looking at waterlogged vehicles.
Unfortunately, uncovering a flooded car’s history isn't always easy. Totaled cars sold at auction should come away with a salvage title, but sometimes there’s only a number or letter code on the title to indicate the fact that a car was flooded. Only in a few states are flooded cars required to be re-sold with a “flood” title stating that history.
To avoid buying a used car with flood damage, check out the National Motor Vehicle Title Information System to confirm that the title of the car you’re considering hasn’t been “washed” of its flood history. Visually inspect the car, too: look under the dashboard for any bare screws that show signs of rust; see if the carpet has any signs of being waterlogged; and check if the cardboard in the air filter looks soggy.
The bottom line isn’t great: car prices are rising, and any downward trends are unpredictable. But, as Experian says, the best time to buy a car is when you need one.
https://www.wsj.com/personal-finance/trump-auto-tariffs-car-prices-0b7ca5f2 https://www.experian.com/blogs/ask-experian/should-you-buy-car-in-2025/ https://caredge.com/guides/new-or-used-car-2025 https://www.kbb.com/car-advice/buying-used-electric-car/
