With rising gas prices now combining with average sales prices at near-record highs, automakers looking for a successful second quarter need to ramp up efforts to make vehicles more affordable and more efficient.
New reports from analysts at CarGurus.com and Cox Automotive Inc. show that while first quarter sales were down overall, there were upticks in cheap cars and hybrids — and automakers can expect more of the same.
The impact of the war on Iran will be felt long after the bullets stop flying as gas prices are expected to remain high for several months, if not longer. New vehicle affordability, whether it’s the number on the window sticker or the interest rates for on the loan, remains an ongoing factor in consumer decisions.
As a result, hybrids and cars with sticker prices at $30,000 or less were the big moves. On the used car front, two-year-old or newer vehicles were up 24 percent in Q1 with eight- to 10-year-old models typically selling for $10,000 or less were the next most popular models.
“Today’s consumers are being nimble, making carefully considered compromises to get into the vehicles they want at prices that work,” said Kevin Roberts, director of Economic and Market Intelligence at CarGurus.
“Nearly new used vehicle sales are a bright spot this quarter as shoppers with a budget around $30,000 are now more open to lightly used models to expand their options — a smart move as the share of new cars available at that price point has dropped 60 percent over the last five years.”
The rising demand — and sales — of used cars was felt by consumers, who saw prices of previously owned vehicles jump 6.5 percent on a year-over-year basis last month.
“As soon as this year began, prices at Manheim started moving higher as dealers anticipated strong demand from higher tax refunds to consumers,” said Jeremy Robb, chief economist at Cox Automotive.
“Sales conversion rates, a clear sign of demand, were higher against 2025 for every week but one in Q1, and vehicle value trends at auction show we are well ahead of last year and where we would normally be during a spring bounce in the wholesale markets.
“We thought we’d see some impact from the Middle East conflict, and that may still happen. But right now, the data is clear: used-vehicle demand is healthy and inventory levels are relatively tight.”
Rising prices equating to slower sales represent an opportunity for savvy shoppers. There is a 73-day supply of new cars, trucks, and SUVs sitting on dealer lots across the country right now. That’s well above the desired industry average of 60 days. Every category but hybrids is at least 63 days or higher.
Getting a deal on a compact crossover with a hybrid powertrain is going to be difficult, but if you’re in the market for a full-size SUV or large sedan, now is the time to buy as dealers will be looking to get rid of those vehicles. And if you’re in the market for a new EV, it’s still a good time to shop. The anticipated rise in EV sales hasn’t hit yet, although used electric vehicles rose significantly, according to CarGurus.
“Used EV consideration has translated to demand, with sales up 33 percent YoY despite the expiration of federal tax credits. Affordable models led used EV sales growth, with the Tesla Model Y, Hyundai Ioniq 5, Chevy Equinox EV, and Nissan Ariya seeing some of the biggest gains,” the website noted.
[Images: Toyota, Honda, Chevrolet, Hyundai]
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