Analysts say there will be intense competition among automakers in 2026, but buyers may not be able to pay less due to higher MSRPs, stable inventories and affordability pressures.
More incentives? Higher prices? What car buyers can expect in 2026
Auto industry experts predict that car sales will be flat compared to 2025.
- Analysts expect U.S. new car sales to be flat in 2026 and competition among automakers to intensify.
- Despite increased competition, average transaction prices are expected to rise due to higher MSRPs.
- Affordability remains a key issue as average monthly payments increase and more buyers choose longer loan terms.
- Experts advise consumers to research vehicles that meet their needs, rather than trying to time the market to find the best deal.
Early U.S. auto sales numbers indicate this will be a year of intense competition among automakers, with the pie expected to remain the same size as last year, but every automaker still wants a bigger piece.
According to data from J.D. Power and Cox Automotive, the companies project that U.S. retail new car sales in 2026 could be flat or slightly down compared to 2025, when automakers sold 16.2 million new cars domestically.
“Looking ahead, multiple automakers have publicly announced their intention to increase sales in 2026,” said Thomas King, president of OEM Solutions at J.D. Power. “However, with total new car sales this year expected to be similar to last year, competition is expected to intensify in the coming months as some automakers plan to reduce sales.”
That begs the question. Will car manufacturers have more incentive to compete for limited shoppers, and will car buyers be able to find good deals? The answer is complex.
“Our full-year 2026 forecast is for incentives to increase by $400 to $3,500, but given the very high baseline electric vehicle incentive spending last year, the true change for (gasoline) powered vehicles will be more than $500,” Tyson Jominy, vice president of data analytics at J.D. Power, told the Detroit Free Press, part of the USA TODAY Network.
How each automaker uses the additional incentives of $500 or more will depend on inventory and cost pressures, he said, and sales competition may not force car buyers to walk away for less.
“As automakers continue to raise (manufacturer’s suggested retail prices), consumers will, on average, be paying a higher price before incentives,” Jominy said. “The final transaction price (for the full year) is expected to average $46,600, an increase of $800 compared to 2025.”
Look at inventory and guess prices
Jominy said most automakers increase MSRP as part of their normal operations, taking into account costs such as employee salaries, raw material prices, precious metals and oil. Manufacturer’s suggested retail prices increased by about 2.8% across the industry last year compared to 2024, according to JD Power data. Over the 10-year period from 2010 to 2019, Manufacturer’s Suggested Retail Prices rose 3% each year and never declined on an annualized basis, he said.
Mark Schirmer, a spokesman for Cox Automotive, said it’s helpful to look at inventory to see where average transaction prices — the prices customers pay after all discounts and trade-ins are taken out — are heading.
“If sales slow, automakers will have to face that reality and decide whether to reduce production or increase incentives,” Schirmer said.
Industry-wide inventory is at 2.77 million vehicles, according to Cox Automotive data, which Schirmer said is a neutral level similar to 2025 and slightly down from the 2024 average.
“This is not a level that suggests the incentive floodgates are about to open, but as always, there are good deals out there,” Schirmer said.
Erin Keating, an executive analyst at Cox Automotive, said most automakers are now tightly controlling inventory and cutting production to keep profits high.
“This year is all about market share gains and remains very competitive, but cost pressures will likely keep incentives only as an emergency measure,” Keating said. “Car manufacturers that can serve customers from all income groups and have high-value hybrid vehicle fleets should fare better than others.”
Sluggish sales growth at the beginning of the year
U.S. sales in January and February were lower than the same period last year, according to JD Power data.
U.S. new vehicle sales, including retail and non-retail transactions, are expected to reach 1.183 million vehicles in February, down 3.8% from the same month last year, according to a joint forecast from J.D. Power and GlobalData. The February sale date is the same day as February 2025, the 24th.
Jominy said the pace of sales will accelerate in March, but it is likely to be the weakest month of the year as comparisons with March 2025 become uncomfortable. Last March, President Donald Trump announced a 25% tariff on all imported cars and imported auto parts. Jominy said the news sparked a surge in new car sales as many buyers rushed to avoid rising prices after the tariffs went into effect. Most automakers were able to absorb the increased costs from last year’s tariffs, so expected price hikes did not occur.
“All this shows that consumers should not rush to buy a car and there is no need to wait,” Jominy said. “It is much more cost-effective in the long run for consumers to buy a well-researched vehicle to meet their needs from a dealer who is familiar with the sales process and service department.”
Loan lengthening
Experts say affordability remains a hot topic this year, even though prices fell slightly in January and rose again in February.
Average retail transaction prices in February are expected to rise 2.7% year-over-year to $46,303, with non-EV prices rising 3% to $46,097 and EV prices rising 2.6% to $46,528, according to JD Power data.
“Affordability pressures remain significant, with average monthly finance payments reaching $811, an increase of $32 from a year ago,” J.D. Power’s Mr. King said of expected February results. “Accordingly, more consumers are turning to 84-month loan terms, which are expected to account for 12.7% of loan sales this month (compared to 7.7% a year ago).”
King said easing interest rates and high used car values provide some peace of mind to buyers facing high monthly payments. He said the average interest rate on new car loans was 6.72% in February, down 31 basis points from the same month last year.
“The average price of a used car is $29,488, up $448 year-over-year, reflecting the continued low supply of recent model year used cars due to reduced new car production due to the pandemic,” King said. “The continued rise in used car prices continues to be good news for new car buyers taking advantage of trade-ins, with average trade-in equity in February at $7,013, roughly unchanged from a year ago.”
There’s always a trade-off
Schirmer added that used car values typically tend to rise in the spring as used car purchases increase due to tax rebates and dealers wanting more used car inventory.
“Of course, as the value of used cars goes up, so does the retail price, so it’s a trade-off,” Schirmer said.
Mr King warned that new car buyers with negative trade-in equity (meaning they owe more than the car is worth) is expected to reach 31.5% in February, an increase of 3.4 percentage points from February 2025.
Key for consumers: Every transaction is unique and everyone’s situation is different, so when to buy a new car or when to buy a new car will depend on your situation.
“If price is an issue, the best advice I always hear is to be honest and transparent with your dealer about your monthly payment goals. They’ll try to work something out for you,” Schirmer said.
Jamie L. Lareau is a senior auto writer covering Ford Motor Company for the Detroit Free Press. Contact Jamie at jlareau@freepress.com. Follow her on Twitter @jlareauan. To sign up for our automotive newsletter. become a subscriber.
