Vehicle affordability is like an octopus.

Hard to get your arms around. Elusive. Far-reaching tentacles in every direction.

And given the impact affordability (or lack thereof) is having in automotive, the topic is worth a bit of ink.

“Affordability is the dominant theme at the midpoint of 2025, and it has implications across nearly every other issue facing the automotive industry,” Dave Cantin Group president Brian Gordon said in a news release accompanying the firm’s 2025 Midyear Market Outlook Report.

“Affordability is reshaping purchase decisions, driving interest in cheaper Chinese vehicles, and making any manufacturer decision to pass on tariff costs to consumers virtually impossible without the risk of losing market share,” Gordon said.

DCG, which compiled the report with Kaiser Associates, pointed to high interest rates, flat wage growth, indications of a jobs slowdown and uncertainty around tariffs — all despite an economy that has “has held up well this year.”

Consumers still plan to buy cars, however, and are aware they’re likely to pay a heftier price, the DCG/Kaiser survey found. They’re also OK with financing vehicle purchases, the report said.

As it turns out, it’s not an “if” but a “how” question for car buyers.

“Consumer demand looks good, not bad, despite new car prices holding near record highs,” the firms said in the report.

“At midyear, affordability is impacting what and how to purchase more than whether to purchase at all,” they added. “Consumers are trading down (midsize vehicles – trucks, SUVs, and cross-overs – are hot), willing to give up bells and whistles and reduce trim packages, and more open to switching brands.”

The report points to brands that provide affordability and reliability as being fast risers in this environment, giving the example of Buick and Mazda.

What does this mean for dealers?

“Dealers should be playing the long game and truly looking out for their customers,” the report suggests in its DCG’s Retail Takeaways piece on affordability.

“Dealers are proving they can drive profitability across different areas of their business; sacrificing on new-vehicle sales to win the customer is a winning strategy,” they added. “Dealers should challenge their manufacturer partners on their structural efforts to improve affordability (new products, reduced trim packages, financing support, tariff mitigation, etc.).”

DCG indicated that the Federal Reserve is expected to decrease interest rates by 75 basis points before year-end. This would soften borrowing rates for both dealers and consumers and spur growth in the economy, the report said.

“Dealers need to pay attention to local job growth, unemployment rates and wage growth to better understand the regional consumers’ financial picture,” DCG indicated.

And on a broader level, dealers are making the necessary adjustments.

DCG says retailers are leaning on their revenue diversity — parts, service, finance, insurance, used cars — and generating record profits.

“U.S. dealers are proving once again how resilient they are and how sophisticated their customer-focused business models have become,” Dave Cantin Group CEO Dave Cantin said in a news release. “Affordability challenges are forcing adaptation, and dealers are leading the way.”

In a similar report, The Presidio Group found that dealers may soon have to deal with more of the tariff-specific affordability issues that largely have been the domain of OEMs to this point.

“The industry will soon begin to absorb the full impact of changing U.S. tariffs. To date, automakers have mostly born the higher cost, but those increases likely will eventually be passed to the customer, further pressuring vehicle affordability,” Presidio said in its latest Presidio Perspectives quarterly report.

“For dealers, it’s about controlling the ‘controllables’ — deploying strategic initiatives to grow higher-margin businesses, embracing technology to improve both the customer experience and dealership productivity and balancing brands and locations to optimize long-term portfolio performance,” the firm added.