J.D. Power-GlobalData Automotive Forecast January 2025

New-Vehicle Retail Sales Expected to Rise 4.8% While Consumer Spending Expected to Set a Record for January

J.D. Power:

The Total Sales Forecast

Total new-vehicle sales for January 2025, including retail and non-retail transactions, are projected to reach 1,105,900, a 4.4% increase from January 2024 according to a joint forecast from J.D. Power and GlobalData. January 2025 has 25 selling days, the same as January 2024.

The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 15.6 million units, up 0.6 million units from January 2024.

The Retail Sales Forecast

New-vehicle retail sales for January 2025 are expected to increase from a year ago. Retail sales of new vehicles are expected to reach 904,200, a 4.8% increase from January 2024.

The Takeaways

Thomas King, president of the data and analytics division at J.D. Power:

“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. While the decline from the December sales pace is notable, it is important to recognize that January is typically the lowest sales volume month of the year. As such, the January sales pace is generally not indicative of the long-term outlook for the industry.

“December’s strong sales pace was fueled by manufacturer incentives aimed at clearing 2024 model-year inventory. Additionally, speculation on changes to the availability of government rebates for electric vehicles encouraged many EV purchases that would otherwise have occurred at some point in 2025. In combination, these factors explain the relative strength of December and relative softness of the 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.”

The average retail transaction price for new vehicles is trending toward $44,636, down $238 (0.5%) from January 2024. The combination means that buyers are on track to spend nearly $38.5 billion on new vehicles this month—5.3% higher than January 2024, and 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% increase from December and a 31.1% increase from January 2024. Rising inventory levels are leading to deeper discounts from both manufacturers and retailers, although some high-volume vehicles remain in short supply.

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

Total aggregate retailer profit from new-vehicle sales for this month 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 expected to grow 29.3% from January 2024 and is on track to reach $3,226. Expressed as a percentage of MSRP, incentive spending is currently at 6.5%, an increase of 1.3 percentage points from a year ago. Spending decreased by $130 per unit from December 2024. The decrease from December reflects normal seasonal patterns as year-end promotional events conclude.

“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.

“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.”

Average monthly finance payments this month are on pace to be $734, up $11 from January 2024. The average interest rate for new-vehicle loans is expected to be 6.7%, down 16 basis points from a year ago.

So far in January, average used-vehicle retail prices are $27,794, down $345 (-1.2%) from a year ago. The decline in used-vehicle values is translating to lower trade-in equity for owners, now trending toward $7,636, which is down $538 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. Several factors could disrupt this dynamic, including the potential for changes to federal electric vehicle 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, as evidenced by the simple fact that consumers will spend more money on new vehicles this January than ever before.”

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 1.3 percentage points from January 2024.
• Average incentive spending per unit on trucks/SUVs in January is expected to be $3,410, up $751 from a year ago, while the average spending on cars is expected to be $2,383, 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/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 0.3 percentage points 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.

EV Outlook

Elizabeth Krear, vice president of the electric vehicle practice at J.D. Power:

“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 0.7 percentage points from 2023. 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.

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%. It’s notable that December’s average transaction price for battery electric vehicles 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.”

Global Sales Outlook

Jeff Schuster, vice president of research, automotive at GlobalData:

“The global light-vehicle selling rate for December reached 96.0 million units, marking the highest monthly level since August 2023, when China's recovery surged. Sales in the month were up 6% year over year to 8.6 million units, driving the total for 2024 to 88.6 million units, a 2% increase from 2023.

“Global sales in December were boosted by a 9% growth in China and India. Additionally, Eastern Europe saw an 8% increase. However, Japan experienced a 9% decline in sales and Korea saw a decrease of 0.2%. The Chinese scrappage subsidy program that increased 2024 sales was extended until the end of 2025 and was expanded to provide additional support for demand. The Japanese market ended the year on a subdued note due to persistent inflation, a weak yen and falling real wages.

“Looking ahead to January, a material drop-off from the year-end strength of 2024 is not anticipated. The month is currently projected to have a selling rate range of 90-92 million units, with volume expected to reach 7.0 million units, a 6% increase from January 2024.

“The global market has started the year positively, with expectations for total sales to reach 91.7 million units, up nearly 4% from 2024. However, there is a risk to the U.S. forecast due to the continued threat of tariffs. If widespread tariffs are imposed, up to one million units of risk could affect the U.S. forecast. Retaliation could escalate global volume risk and increase pricing on other goods, potentially disrupting the current momentum in the auto industry.”

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