Tariffs and Expiring Federal EV Tax Credits Fuel Affordability Challenges in Auto After H1 Sales Boom, According to Cars Commerce's Industry Insights Report

Rhea-AI Summary

Cars Commerce (NYSE:CARS) has released its Industry Insights 1H Report, revealing significant shifts in the automotive market. The report shows that while SAAR peaked above 17 million in March-April, the pace has slowed due to pre-tariff buying activity.

Key findings include: U.S.-built vehicle prices decreased by $200 on average, while imports saw varied price changes, with UK imports jumping by $10,000 and EU imports rising by $2,500. The entry-level vehicle segment (under $30,000) has shrunk to 13.6% market share, down from 38% in 2019. The used car market saw a 3% price increase in H1 QoQ, with inventory up 2% year-over-year.

With the $7,500 federal EV tax credit expiring in September and tariffs affecting import prices, affordability remains a major market challenge.

Positive

• U.S.-built vehicle prices decreased by $200 on average
• 73% of consumers would consider buying U.S.-built vehicles to avoid tariff costs
• Overall new car units grew 5.6% year over year in H1 2025
• Used inventory increased 2% year-over-year with faster turnover rates
• Used car market seeing influx of newer, lower-mileage vehicles from trade-ins

Negative

• Entry-level vehicle segment (under $30,000) declined to 13.6% market share from 38% in 2019
• UK import prices increased by over $10,000, EU imports rose by $2,500
• 92% of entry-level vehicles are built outside the U.S., making them vulnerable to tariffs
• Used car prices increased by 3% in H1 quarter-over-quarter
• $7,500 federal EV tax credit expiring in September affects affordability

Imported Vehicle Prices Rise While U.S.-built Vehicles Drop $200 on Average

CHICAGO, July 18, 2025 /PRNewswire/ -- Cars.com Inc. (NYSE: CARS) (d/b/a "Cars Commerce Inc."), an audience-driven technology company empowering the automotive industry, reveals how federal policy shifts are reshaping the new and used car market in its Industry Insights 1H Report. This comprehensive report draws on consumer demand data from Cars.com's more than 29 million in-market shoppers and vehicle supply and pricing data from millions of new and used vehicles on its marketplace. It is also informed by Cars Commerce's aggregated platform data, which includes 140 million monthly consumer intent signals from more than 7,000 retail dealer websites and supply data from across the company's retail websites, trade and appraisal solution and wholesale auction platform, providing broad automotive insights on supply and demand.

"The SAAR spiked above 17 million in March and April, but that pace has slowed, signaling the pre-tariff buying activity has passed," said David Greene, industry analyst at Cars Commerce. "With price hikes on many imports starting to emerge, the $7,500 federal EV tax credit set to expire in September, and the entry-priced segment now shrinking for three consecutive months, affordability remains the biggest challenge to continued growth. How automakers respond in the second half — through pricing, production and incentives — will shape the road ahead."

On a positive note, average new vehicle prices have increased only slightly — just under $100 since January. New U.S.-built vehicle prices are down nearly $200 on average. According to Cars.com data, more than half of consumers say tariffs have influenced them to seek out American-made vehicles, and over 73% would consider buying U.S.-built vehicles to avoid added costs.¹ As affordability concerns persist, consumers are turning to tools like Cars.com's American-Made Index, which helps shoppers know which vehicles contribute most to the local economy.

Tariff-related pricing impact is a mixed bag and varies by country. Imports from the U.K., a segment that accounts for just 1% of available inventory, saw the most significant jump of more than $10,000. EU imports, which makes up approximately 5% of inventory, rose by almost $2,500. Meanwhile, prices fell for vehicles from China, Canada, and South Korea.

Entry-Level Vehicle Segments Are Shrinking 
Inventory of new vehicles priced under $30,000 — the most tariff-sensitive segment — averaged 13.6% share in the first half of 2025. This is down significantly from 2019, when entry-level vehicles made up 38% of the market and reflects the third consecutive month of declines. With 92% of these vehicles built outside of the U.S., tariffs are disproportionately affecting this entry-level tier, which relies almost entirely on foreign-built vehicles. Only two models in this segment are built in the U.S. – the Honda Civic and Toyota Corolla – while some are also produced in Japan. While overall new car units grew 5.6% year over year in the first half of 2025, the entry-level segment lagged behind at just 3.9% growth in the same time period.

The mid-range new car segment ($30,000 to $49,000) accounts for nearly half of all inventory — and within this tier, 50% of the vehicles are imported. Within the $70,000-plus new car segment, the share of imported vehicles increased from 40% in May to 41% in June, suggesting automakers are adjusting for less price-sensitive consumers.

EV Incentives Expiring as Prices Climb
EV buyers face their own deadline with roughly 75 days left to save thousands before the federal EV tax credit for new and used vehicles is set to expire. With the average new electric vehicle priced at $65,000 —the federal EV tax credit is up to $7,500 for new vehicles and $4,000 for used– is a critical factor in purchase decisions. According to a Cars.com survey, 53% of current EV owners cited the credit as one of the main reasons they purchased their vehicle, and 48% of current EV shoppers say the incentive is influencing their decision.²

Used Market Rebounds With More 'Young' Trade-Ins
Amid rising new-car prices, used car prices rose nearly 3% in H1 QoQ, reflecting changes in supply dynamics and continued demand for more affordable vehicle options. Used inventory increased 2% year over year in the first half of 2025, largely driven by a wave of trade-ins during the new-car buying jump in March and April, which was prompted by tariff-related concerns. This influx brought newer, lower-mileage vehicles into the used market, contributing to a faster turnover rate: the average time on dealer lots is down nearly 5% year over year.

To download the full report, visit www.CarsCommerce.inc.

¹Cars.com Consumer Survey; May 28-June 6, 2025; 997 respondents
²Cars.com EV Shoppers and Owners Study, May 21-June 17, 2025; 1,059 respondents

*Cars Commerce internal data

ABOUT CARS COMMERCE
Cars Commerce is an audience-driven technology company empowering the automotive industry. The Company simplifies everything about car buying and selling with powerful products, solutions and AI-driven technologies that span pretail, retail and post-sale activities – enabling more efficient and profitable retail operations. The Cars Commerce platform is organized around industry-leading brands such as the flagship automotive marketplace and dealer reputation site Cars.com, award-winning website and digital retail technology and marketing services from Dealer Inspire, essential trade-in and appraisal technology from AccuTrade, a reputation-based dealer-to-dealer wholesale auction from DealerClub and exclusive in-market media solutions from the Cars Commerce Media Network. Learn more at www.carscommerce.inc.

 

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SOURCE Cars.com Inc.

FAQ

How have tariffs affected car prices on Cars.com (NYSE:CARS) marketplace in 2025?

Tariff impacts varied by country: UK imports increased by $10,000, EU imports rose by $2,500, while prices fell for vehicles from China, Canada, and South Korea. U.S.-built vehicles decreased by $200 on average.

What is happening to the entry-level vehicle segment according to Cars Commerce's H1 2025 report?

The entry-level vehicle segment (under $30,000) has declined to 13.6% market share, down significantly from 38% in 2019, marking the third consecutive month of decline. This segment grew only 3.9% compared to overall market growth of 5.6%.

When is the federal EV tax credit expiring and how much is it worth?

The federal EV tax credit, worth up to $7,500 for new vehicles and $4,000 for used vehicles, is set to expire in September 2025. 53% of current EV owners cited it as a main purchase factor.

How is the used car market performing in 2025 according to Cars Commerce?

The used car market showed a 2% year-over-year inventory increase in H1 2025, with prices up 3% quarter-over-quarter. Average time on dealer lots decreased by 5% year-over-year due to increased turnover.

What percentage of consumers are influenced by tariffs in their car buying decisions?

According to Cars.com data, more than 50% of consumers say tariffs have influenced them to seek American-made vehicles, and over 73% would consider buying U.S.-built vehicles to avoid added costs.