Cars.com Highlights Affordability Challenges in Auto Market Amid Policy Changes

On July 18, 2025, Cars.com Inc. (NYSE: CARS), operating as Cars Commerce Inc., released its Industry Insights 1H Report, shedding light on the evolving landscape of the new and used car market. The report draws from a wealth of data, including consumer demand from more than 29 million in-market shoppers and vehicle pricing from millions of listings on its platform. In light of recent federal policy shifts, especially concerning tariffs and expiring electric vehicle (EV) tax credits, affordability remains a significant concern for consumers.

David Greene, an industry analyst at Cars Commerce, noted that the Seasonally Adjusted Annual Rate (SAAR) for vehicle sales spiked above 17 million units in March and April. However, this momentum appears to have slowed, indicating that the rush to purchase before tariff-related price increases may be waning. Greene emphasized that many consumers are feeling the pinch from rising import prices, particularly with the impending expiration of the federal EV tax credit, which is set to end in September. He stated, "How automakers respond in the second half — through pricing, production, and incentives — will shape the road ahead."

The report revealed that while average new vehicle prices have only seen a slight increase of just under $100 since January, prices for new U.S.-built vehicles have actually decreased by nearly $200 on average. A notable trend is that over half of consumers surveyed reported that tariffs have influenced their decision to seek out American-made vehicles, with more than 73% expressing a willingness to buy U.S.-built cars to avoid additional costs.

One of the most concerning trends highlighted in the report is the shrinking inventory of entry-level vehicles, priced under $30,000. This segment, which is highly sensitive to tariffs, comprised only 13.6% of the market share in the first half of 2025, a significant decline from 38% in 2019. Greene pointed out that 92% of these affordable vehicles are built outside the U.S., making them particularly vulnerable to tariff impacts. The only two models in this price tier manufactured domestically are the Honda Civic and Toyota Corolla.

Despite an overall year-over-year growth of 5.6% in new car units during the first half of 2025, the entry-level segment lagged behind with only 3.9% growth.

In contrast, the mid-range vehicle segment (priced between $30,000 and $49,000) now accounts for nearly half of all inventory, with 50% of these vehicles being imported. The report also noted a rise in the share of imported vehicles in the luxury segment (priced over $70,000), which increased from 40% in May to 41% in June. This shift suggests that automakers are targeting less price-sensitive consumers amidst changing market conditions.

As the deadline for the federal EV tax credit approaches, consumers are faced with a critical decision-making moment. The average price of a new electric vehicle currently stands at $65,000, with the federal tax credit amounting to up to $7,500 for new vehicles and $4,000 for used. According to a Cars.com survey, 53% of current EV owners cited the credit as a primary reason for their purchase, while 48% of prospective EV buyers indicated that the incentive significantly influences their decision.

Amid rising prices for new cars, the used car market is showing signs of recovery, with prices climbing nearly 3% quarter-over-quarter in the first half of 2025. This uptick can be attributed to a surge in trade-ins, particularly during March and April, which led to an influx of newer, lower-mileage vehicles entering the used market. As a result, the average time vehicles spend on dealer lots has decreased by nearly 5% year-over-year.

Cars Commerce's Industry Insights Report paints a complex picture of the automotive landscape as it grapples with affordability challenges driven by federal policies and market dynamics. With the expiration of the EV tax credit looming and the entry-level vehicle segment shrinking, the actions taken by automakers in the second half of 2025 will be crucial in determining the industry's trajectory. As consumers increasingly turn to American-made options and the used market gains momentum, the response to these evolving conditions will be closely watched.