New Car Prices Hold Firm in May—Even as Tariff Fears and Slowing Sales Mount

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We’ve grown used to volatility at the dealership—skyrocketing prices, empty lots, and waiting lists that stretch for months. But now, in a moment of eerie calm, the numbers suggest something unusual: a market holding its breath.

New-vehicle prices in the U.S. remained stable in May, despite the auto market showing signs of softening and tariff policy casting uncertainty over the months ahead. According to the latest data from Kelley Blue Book, the average transaction price (ATP) for a new vehicle in May was $48,799, virtually unchanged from April and just 1% higher than a year ago. That pricing resilience comes despite a notable slowdown in the sales pace, which dropped from 17.3 million in April to 15.6 million in May on a seasonally adjusted annual basis.“We’re seeing remarkable price stability,” said Erin Keating, Executive Analyst at Cox Automotive. “It’s a reminder that change in the auto industry tends to move slowly, at least until it doesn’t. We do expect prices to rise later this summer as the inflationary effects of tariffs begin to take hold.”

The average MSRP rose to $50,968 in May, the highest point so far in 2025. But transaction prices haven’t followed that same upward trajectory—yet. Many automakers are maintaining steady incentives to prevent sparking price wars, even as dealership margins face increasing pressure.

Incentive spending in May averaged 6.8% of ATP, or roughly $3,297 per vehicle, up slightly from April’s 6.7%. The figure is effectively flat compared to a year ago, a sign that automakers are cautiously defending both pricing power and dealer profitability.

While the average price across the industry remained steady, certain segments experienced sharp declines in the opposite direction. Sports Cars, Luxury Cars, and Luxury Subcompact SUVs saw the biggest month-over-month price increases in May—an unexpected turn as higher interest rates and inflation weigh on household budgets.

Also climbing were Small and Midsize Pickup Trucks, with prices rising 0.9% to $42,062. At the same time, incentives in this segment decreased, from 6.0% to 5.9% of ATP, indicating that buyers are paying more with fewer discounts.

By contrast, prices in the Compact SUV segment, the most popular in the U.S., remained flat at $36,515, while incentive spending rose slightly to 8.0%.

Incentive strategies varied widely across automakers:

• Toyota, Tesla, and Nissan ramped up incentive spending in May. Toyota, in particular, increased discounts by over 20%, though it still spends far less than average—1% of ATP, up from 3.4% in April.
• Volkswagen, Mazda, Land Rover, Volvo, and BMW cut incentives by more than 10% month over month.
• Incentives also dropped notably for Chrysler, Jeep, and Ram, all of which fall under the Stellantis umbrella.

This uneven approach suggests a market where competition and supply chain dynamics vary significantly across different brands and segments.

While luxury and pickup prices crept up, electric vehicles (EVs) moved in the opposite direction. The average EV transaction price in May decreased to $57,734, down from $59,123 in April and 1.1% lower year-over-year.

But the bigger story is incentives. EV buyers received record discounts, with the average incentive increasing to 14.2% of the average transaction price (ATP), or roughly $8,225 per vehicle—the highest on record since the start of the “modern EV era” (post-2018), according to Kelley Blue Book.

Tesla, still the market leader, saw its ATP decline 1.5% to $55,277, with year-over-year prices down 2.8%. The Model Y, the country’s top-selling EV, fell 2.9% month over month, averaging $53,895 in May.

The current flat pricing may not last much longer. New tariffs on Chinese-made electric vehicles, and expected cost increases in raw materials and components, could start pushing retail prices higher by late summer.

For now, however, consumers benefit from a moment of calm in a market that’s often anything but. Prices are steady, incentives are selectively rising, and certain segments, especially electric vehicle s (EVs), offer more value than they did just a few months ago.