With tariffs, stubborn inflation, and stock market-selloffs, there are many factors that are dampening consumer sentiment in the United States. An economic slowdown impacts everyone, car buyers included. How will a recession impact car sales? How will car buyers be affected by a recession in 2025? Will it be the same as 2008, or are things different this time around? Let’s take a look at what history can teach us.
What Happens to Auto Sales in an Economic Recession?
For most, the mere mention of a recession is cause for cutting back, saving money and spending less. Discretionary spending, essentially spending by choice rather than by need, always plummets in a recession. For some households, discretionary spending includes that shiny new car you’ve had your eye on. For others, a car is essential for work, etc. In a recession, auto sales decline significantly as many buyers back out of the market. However, a recession in 2025 is not going to be the same for car buying as it was in 2008 and 2020.
New Car Sales in a Recession
New vehicle sales in the U.S. fell nearly 40 percent during the ‘Great Recession’ of 2008. Gas-guzzlers were hit the worst, and hybrid powertrains made their big break. 2020’s pandemic-driven recession was the shortest in history, lasting just two months. Even then, auto sales were down 15 percent compared to 2019.
What’s different now? Car prices have climbed for three years straight at a pace never seen before. The result? Reluctant car buyers who are more likely to patiently seek out deals. If an economic recession begins, new car prices will be forced downward by a drop in demand. With high interest rates, car dealers lose money the longer a car sits on the lot due to floorplanning costs. Not selling is never an option, meaning that incentives will mount until buyers see value.
Used Car Prices in a Recession – Should you sell now?
If you’re thinking about selling, you should decide sooner rather than later. We track used car prices weekly, and we’ve seen months of declines in both retail sales and the wholesale markets that determine trade-in values. Used car values are falling, and will continue to decline if a recession is in the cards for 2025.
The average used car listing price has fallen from an all-time high of around $28,000 in 2022 to $25,128 in March 2025. With economic worries lingering, we expect retail used car prices to fall another 3-5% through the end of the year. Those considering selling a vehicle in 2025 should assume that selling sooner will bring a high price versus waiting.
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