When Will Car Prices Drop?

If you've been interested in buying a new or used car recently, you might've noticed that prices are a little bit higher than they may have been a few months or a year ago. This jump in prices has caused many prospective buyers to sit on the fence as they wait things out and wonder, "When will car prices drop?"

The short answer is: They won't.

There is some good news to report. The sky-high dealer prices we saw in 2022 and 2023 — including massive markups and inflated used car values — have eased, thanks to new-car supplies coming back to pre-pandemic levels.

This article focuses on the timing of when car prices will drop. If you're looking to determine if now is a good time to buy a car? Take a look at our related story, "When Is the Best Time to Buy a New Car?" We also have its companion story, "When Is the Best Time to Buy a Used Car?"

Jump to: 

• What you need to know about current car prices
• Why are car prices still high?
• Will car prices drop during the rest of 2025?
• Which brands are offering the most and least discounts on new cars?
• When will we see more incentives and rebates on new cars?
• Are used car prices dropping?
• Why it is still a great time to trade in your car
• When will new car prices drop to pre-pandemic levels?

What you need to know about current car prices

Due to uncertainty over trade disputes and new vehicle tariffs, things seem to be in a bit of a holding pattern. According to Edmunds data, the average transaction price (ATP) for a new car in April 2025 was $48,422, slightly higher than average for the previous 12 months.

MSRPs, however, have averaged around $49,500 during this same time, and April 2025's average MSRP was $50,408. The correlation between MSRPs and ATPs shows that "there is some discounting going on," according to Edmunds Director of Insights Ivan Drury. Indeed, since a year ago, average discounts have wavered between 3.3% and 4.2% since a year ago.

• According to Edmunds sales data, the average transaction price for new cars was more than 29% higher and 35% higher for 3-year-old used cars in April 2025 than in April 2020.
• That said, sales prices have stabilized and have been heading slightly downward since January 2024, with the average discount increasing from $1,469 back then to $1,985 in April 2025.
• High interest rates remain a factor in keeping people from buying cars.
• The top five brands offering the greatest discounts are Lincoln, Mercedes-Benz, Ram, Acura and Ford.
• Automakers such as Kia, Honda, Land Rover, Mazda and Toyota are offering the least discounts from MSRP.

Why are car prices still high?

Prices trended ever so slightly downward in the first few months of 2025 after some late-year increases. But some big-name automakers, such as Ford, BMW and Subaru, have increased their MSRPs in response to tariffs. 

Adding to the problem, remember that big new-car shortage from three years ago? Well, one long-term consequence is that fewer new vehicles were leased in that time, vehicles that would otherwise come in for a return at the end of a three-year term. Fewer new vehicles in 2022 means fewer lightly used vehicles in 2025, and that means higher prices for both new and used cars.

According to Edmunds data, the average transaction price for a 3-year-old vehicle eclipsed $30,000 for the first time since 2022, while the average transaction price of all used vehicles currently sits at $25,373.

Will car prices drop during the rest of 2025?

Edmunds analysts are not expecting new car prices to drop anytime soon, and the best time to buy a new car is now. Says Drury, "Waiting will only make buying more difficult as we're already seeing a downward trajectory with new car inventory, which will result in fewer discounts." The analyst expects used cars to increase in price as well, but the additional trade-in value likely won't offset higher new-car MSRPs. 

The one potential situation where it might prove beneficial to wait is if a prospective shopper has a particularly valuable used vehicle to trade in, perhaps a foreign-assembled car that would be charged a tariff if sold new. If that buyer were to trade their valuable used car for an American-assembled new car, thereby avoiding tariffs, the money might work out to their advantage.

Which brands are offering the most and least discounts on new cars?

In April 2025, Lincoln offered the highest discounts, averaging $5,661 per vehicle. Mercedes-Benz, Ram, Acura and Ford followed suit, with average price cuts ranging between $3,523 and $4,601. 

Kia, Honda, Land Rover and Mazda proved the stingiest when it comes to discounts from MSRP, each averaging below $1,000 — Kia vehicles were only discounted an average of $324 in April 2025.

We have a detailed breakdown in the chart below. Keep in mind that this chart is a snapshot in time. Things can and will change, but it does give you a basic idea of which automakers are trending up or down in terms of discounts. In the last column, you'll see the days-to-turn figure. Days to turn is an industry term for the average number of days vehicles from a brand sit in dealer inventory before being sold. In general, the longer a car sits on the lot due to slow sales, the more the dealership is motivated to discount it. That said, it is not a hard-and-fast rule, as there are some brands with days to turn below the industry average, yet they're still discounting their vehicles.

When will we see more incentives and rebates on new cars?

Right now, several auto manufacturers offer employee pricing incentives on their existing stock of new vehicles. However, many of those discounts will dry up as tariffs begin to affect new vehicle costs. Rebates have been gradually slowing in the last five months.

Make sure to keep tabs on Edmunds' roundup of incentives and rebates, where we track the latest manufacturer offers on a monthly basis.

Are used car prices dropping?

Used car prices are actually rising. Not only are 3-year-old used vehicles becoming more expensive, but so are 5-year-old cars, which sell for around $25,000 at this time. If you're thinking about purchasing a pre-owned car, prices aren't likely to fall anytime soon and might even rise, so if you think you'll need a car in the next few months, it might be wise to start the purchase process now.

Why it is still a great time to trade in your car

One bright spot to the fact that used car prices remain high is that it makes your current vehicle more valuable. Dealerships are in need of quality used cars and this works in your favor. You'll likely be offered a higher price for your trade-in than you might have expected. A more valuable vehicle can help offset the higher price of a new car, contribute to a better down payment, or even put more money in your pocket after selling it. Use the Edmunds appraisal tool to get an instant, no-obligation offer on your vehicle to determine its true value.

When will new car prices drop to pre-pandemic levels?

In March 2020, when COVID-19 was in full swing, the average ATP was $38,600. Will we ever reach a price that low again? "Never, not in the slightest," Drury said. "The only way for a consumer to get an ATP that mirrors anything pre-COVID is to either get a time machine, buy used, or purchase a different model."