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July 2025 has seen a significant surge in consumer spending on new vehicles, with several factors contributing to this record-breaking trend.
Firstly, the average transaction price for new vehicles has risen to an all-time high of $45,063, marking a 2.1% year-on-year increase[1]. This has led to a total spending of nearly $49.8 billion on new vehicles in July, a 11.3% increase from the same month last year[2].
Secondly, the moderation in auto sales after a surge in March due to U.S. auto tariffs aligns with a gradual normalization in auto purchases rather than a sharp reversal[3]. This indicates a steady demand for new vehicles.
Thirdly, average monthly finance payments have reached a record high of $742 for July, a $12 increase from July 2024[4]. Additionally, there has been an increase in finance loans with terms of 84 months or more, which have become more prevalent[5]. These longer-term loans suggest that consumers are opting for extended payment periods to manage higher purchase prices.
Economic conditions have also played a role in supporting consumer willingness to spend on major purchases like new vehicles. Despite some economic challenges, including softer spending growth among lower-income households[6], the overall economy has remained supportive. The fact that discretionary services and certain goods continue to show positive spending trends suggests underlying consumer confidence[3].
Interest rates for new-vehicle loans have remained relatively high at around 6.54% to 6.89%[5], but they have not significantly deterred consumers from making large purchases. The strong demand for new vehicles and the willingness to accept higher monthly payments have likely contributed to this trend.
The new-vehicle retail market has seen a significant shift towards electric vehicles (EVs) and hybrid vehicles (HVs). EVs are projected to hit 10.9% retail share in July, up 1.9pp from June, marking the first time this year that the segment has reached double digits[7]. PHEVs are also benefitting from similar dynamics, with a forecasted market share of 2.2%, up 0.2pp from a year ago[8]. Traditional HVs are expected to maintain a share of 13.9% this month, flat from June but up 2.9pp from July 2024[9].
Inventory constraints for EVs may soon emerge, as June ended with 213,000 EVs in dealer stock, representing a 65-day supply[10]. This could potentially lead to a rush in EV purchases before federal credits of up to $7,500 on electric vehicles expire on 30 September[11].
Retail sales of new vehicles are forecast to reach nearly 1.16 million in July, representing a 4.1% growth from the same month last year[12]. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 16.4 million units[13].
The total aggregate retailer profit from new-vehicle sales for July is projected to be $2.5 billion[14]. Despite the high transaction prices and finance payments, retailers are expected to reap substantial profits.
In conclusion, July 2025 has seen a significant increase in consumer spending on new vehicles, driven by factors such as high average transaction prices, moderation in auto sales, increased finance payments and durations, favourable economic conditions, and a shift towards electric and hybrid vehicles. The expiration of federal credits on electric vehicles could potentially lead to a rush in purchases before the deadline, further boosting sales figures.
- The increase in consumer spending on new vehicles in July 2025 can also be attributed to the surge in technology adoption, as more people are opting for vehicles equipped with advanced features and connected services.
- The rising trend in consumer spending on sports equipment and apparel has been parallel to the growth in business investments in sports sponsorships and partnerships, reflecting a strong correlation between the two sectors.
