The U.S. new-vehicle market saw a significant surge in electric vehicle sales in September, pushing EV retail market share to a record 12.2 percent as consumers rushed to take advantage of expiring federal tax credits. This spike in EV demand helped maintain a stable overall sales pace throughout the industry, with the seasonally adjusted annualized rate (SAAR) expected to hit 16.2 million units, according to a joint forecast from J.D. Power and GlobalData.
Total new-vehicle sales for September 2025 are projected to reach 1,232,200 units, a marginal 0.1 percent increase from the previous year when adjusted for selling days. New-vehicle retail sales are also expected to see a slight uptick, reaching 1,031,400 units, a 0.4 percent increase from September 2024.
The Real State of the Market
While the aggregate numbers suggest a healthy market, a deeper analysis reveals a complex picture heavily skewed by the current rush to purchase EVs. Thomas King, president of the data and analytics division at J.D. Power, noted that the end of the federal EV tax credit created a temporary rush.
“In aggregate, September sales results point to another month of strong demand for new vehicles,” said Thomas King, president of the data and analytics division at J.D. Power. “However, as has been the case for the past few months, assessing the health of the industry requires a closer look at the underlying market dynamics. The biggest driver of September’s strong sales pace is temporarily inflated demand for electric vehicles. The federal EV tax credit expires at the end of the month, which is causing many shoppers to accelerate their purchase.”
On sheer volume, EV sales are projected to have increased by a staggering 27.5 percent year-over-year. In stark contrast, sales of traditional internal combustion engine (ICE) vehicles are expected to decline by 2.5 percent, highlighting a significant divergence in the market. This shift is also reflected in market share, with ICE vehicles projected to account for just 71.7 percent of retail sales, a drop of 4.9 percentage points from a year ago.
New Vehicle Affordability is Still a Problem
Despite the strong sales month, affordability remains a persistent challenge for many consumers. The average new-vehicle retail transaction price is expected to climb to $45,795, an increase of $1,310, or 2.9 percent, from September 2024. This rise in prices, coupled with relatively low manufacturer incentives, has pushed the average monthly finance payment to a September record of $756.
Manufacturer incentives have indeed remained low, averaging just $3,116 per vehicle. When viewed as a percentage of the manufacturer’s suggested retail price (MSRP), incentive spending is at 6.1 percent, a slight decrease from last year. For non-EV models, the discounts are even slimmer, with incentives falling to just 4.8 percent of MSRP.
“Collectively, these pricing dynamics are helping manufacturers preserve profitability amidst tariff related cost pressure, but at the expense of higher sales volumes,” said King. “Nevertheless, there are some positives for new-vehicle demand, most notably lower interest rates, stronger used-vehicle prices and improved loan availability.”
The average interest rate for new-vehicle loans has decreased to 6.51 percent, down 25 basis points from a year ago. Additionally, rising used-vehicle prices are boosting trade-in values. The average trade-in equity is projected to be $8,430, up $534 from last year, which helps offset higher new-vehicle costs. Access to credit also appears to be improving, with the percentage of buyers with sub-650 FICO scores rising to 14.0 percent, the highest level for September since 2016.
Dealerships Are Healthy
From a dealer perspective, profitability remains strong. Total retailer profit per unit is expected to be $2,240, up slightly from last year. This translates to a projected aggregate retailer profit of $2.2 billion for the month, a 6.0 percent increase from September 2024.
Looking ahead, the forecast for October anticipates a significant shift. The expiration of the EV tax credit is expected to lead to a sharp decline in EV sales.
“Looking to October, the EV dynamic will continue to heavily influence results, but the effect on sales will shift from positive to negative,” said King “A very significant decline in EV sales is expected for October, reflecting both the effect of the federal EV tax credit expiring and the start of payback from all the EV purchases that were accelerated into the summer. The net effect will be heavily influenced by the extent to which manufacturers attempt to offset the loss of the federal EV tax credit, if at all.”
In contrast, hybrid vehicles continue to show resilient growth, capturing a 13.8 percent retail share without the same level of incentive-driven volatility. This steady performance underscores the segment’s growing appeal to a broader range of consumers. The global outlook also shows signs of cautious optimism, with worldwide sales projected to reach 91.2 million units for 2025, a 2.7 percent increase year-over-year.
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