Let’s look ahead at what car shoppers can expect in 2026. Inventories are improving, but affordability isn’t. Prices have proven stubbornly high, incentives are easing and tariffs — plus uncertainty around the 2026 review of the U.S.-Mexico-Canada (USMCA) trade pact — could keep pressure on pricing, especially for smaller models.
On the used side, the market still doesn’t feel normal, particularly at the entry level: Vehicles under $15,000 to $20,000 remain hard to find thanks to pandemic-era supply effects. And while credit is a bit easier to get, loan rates are still high enough that monthly payments can sting. Using smart strategies that involve certified pre-owned, realistic trade-in math and well-timed shopping are more important than ever.
I asked Erin Keating, executive analyst and senior director of economics and industry insights for Cox Automotive, to weigh in on the 2026 outlook. Here’s what she said.
Credit: SPECIAL
Credit: SPECIAL
Edited for length and clarity.
Big picture for new cars
Q: What should new car shoppers expect in 2026 regarding prices, incentives and how hard it is to find the car they want?
A: The inventory recovery we’ve seen over the last few years hasn’t translated into the price relief buyers were hoping for. There’s a real price stickiness — overall transaction prices have stabilized at higher levels, and manufacturers are pulling back on incentives rather than ramping them up.
Tariffs will likely play a role in 2026 pricing, given we didn’t see a ton of movement in 2025, and the 2026 USMCA review could add uncertainty midyear. For mainstream buyers, the math is still challenging: What felt affordable three years ago likely still sits just beyond reach, and that affordability gap isn’t closing as quickly as anyone expected.
As for finding the car you want, manufacturers continue to build products that are profitable and desirable, especially to the higher-income buyer. This means midsize to large SUVs and pickup trucks will continue to be available in volume — for a price. The smaller vehicles may continue to be challenging, as a lot of those are built outside of the U.S. and the manufacturers may decide to be more disciplined in producing them given tariff impacts.
Outlook for used cars
Q: What about used cars in 2026? Will prices finally feel “normal” again, and what kind of used cars will be easiest or hardest to find?
A: We keep waiting for the used market to feel “normal” again, and it’s just not getting there. Inventory is finally up, which is good news, but the real bottleneck is at the entry level. If you’re shopping under $15,000, even $20,000, you’re competing for a limited pool of vehicles. That scarcity traces back to pandemic-era underproduction, and we’re still living with those consequences.
The volume brands like Ford, Chevrolet and Toyota are your best bet for availability, but even there, you’re looking at average prices around $24,000. That’s not the used car market most people remember. The good news is that used car inventory has stopped falling and we’re past the tightest supply constraints, so more options should make their way onto dealer lots.
Interest rates and affordability
Q: How will car loan rates in 2026 affect what people can afford, both for new and used cars?
A: Credit access has loosened — approval rates are up and lenders are more willing to extend credit — but the interest rates themselves remain stubbornly high. Here’s the frustrating part: The Fed has cut rates, but that relief isn’t making it to car buyers.
If you’ve got excellent credit, you can land something in the 5% to 6% range, but for most buyers, we’re talking loan terms stretching to six years at rates that would’ve seemed outrageous three years ago when under 4% was normal. That combination of higher rates and higher prices means monthly payments are painful for a lot of households.
EV prices, discounts and demand
Q: What do you expect to happen with EV prices, discounts and demand in 2026 without the federal tax credit?
A: Take away the federal tax credit and the EV market shrinks fast. We saw that play out dramatically in October 2025, when sales dropped nearly 50% from September 2025. What’s left is heavily luxury-skewed, with mainstream buyers largely sitting it out.
Meanwhile, hybrids are having a moment. People want efficiency and lower emissions, but they also want to avoid range anxiety and charging hassles. For 2026, if you’re interested in electrification but not ready to commit to full EV, hybrids are where the action is and there’s strong inventory, competitive pricing and manufacturers who are genuinely motivated to win your business in this segment.
As for EVs, expect the automakers to let the market take its course to get a better feel for organic demand. On the flip side, as more EVs hit the road, more shoppers may notice them — and ask for a test drive.
Smart strategies for buyers
Q: For budget-conscious buyers, what are one or two smart strategies for getting the most for their money in 2026, whether they’re shopping new or used?
A: If you’ve got a trade-in with equity, now’s the time to use it, since values remain elevated compared to historical norms. And if you’re budget-conscious, certified pre-owned from the volume brands is often your smartest play. You’ll typically find better inventory and better financing rates.
But be realistic. More than half of borrowers are underwater on their loans right now. If that’s you, rolling negative equity into your next purchase just digs the hole deeper. Know your vehicle’s actual value before you walk into a dealership.
And don’t dismiss leasing out of hand. If lower monthly payments are the priority, it’s worth running the numbers, though lease deals vary significantly depending on the brand and what residual values look like.
Chris Hardesty is a veteran news researcher and editor who provides advice on buying, owning and selling cars for Kelley Blue Book and Autotrader.
The Steering Column is a weekly consumer auto column from Cox Automotive. Cox Automotive and The Atlanta Journal-Constitution are owned by parent company, Atlanta-based Cox Enterprises.
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