While sales improved, consumers are taking on bigger financial burdens to buy new cars. Almost 1 in 5 new car buyers in the fourth quarter of 2024 took on a $1,000 or more monthly payment, according to the car shopping site Edmunds. Plus, the rate of borrowers delinquent on their car loans was high in 2023, and ticked up in the first half of 2024.

Are these stronger new vehicle sales sustainable?

At Stivers Ford Lincoln in Waukee, Iowa, 2024 was the most "normal" year they've had since the pandemic.

Owner Scott Politte said that's because they finally had strong inventory after chip shortages limited auto production for years. "What we're seeing is a more cautious buyer," he said.

Politte said that's because some of the incentives car companies used to offer, like 0% interest on a car loan for several years, are not that common anymore. So customers took their time to decide whether to buy.

"It takes them longer to come to that realization that this, it's a new environment for buying vehicles out there," he said.

Because car companies aren't over-producing these days, dealers aren't desperate to get them off the lots.

The cars they are making are larger and have more technology. That's pushed up prices. And yet, said Jessica Caldwell, head of insights at Edmunds, "People are still buying vehicles, and they're still buying vehicles at these high prices."

Those who can afford to take on a big loan for a new car are allocating more money into their car budget, she said. Those high prices likely drove lower and middle-income buyers to the used car market.

The new car market did really pick up in the last few months of 2024, after the election and another Federal Reserve interest rate cut. Partly because lenders started to lower auto loan rates, said Jonathan Smoke, chief economist at Cox Automotive. But not all that much.

"They're still being fairly selective with regards to the terms that they're offering, the level of down payments that they're requiring on the loan," he said.

Smoke thinks there's still plenty of room for interest rates to come down, which could boost new car sales, at least temporarily.

"I feel a lot more confident about the next three to six months than I do for the full year," he said.

Because, he said, potential policy changes from the next Trump administration — tariffs and changes to the electric vehicle tax credit — could disrupt the car market once again.