The auto industry will continue to face economic uncertainty and eroding consumer confidence next year with affordability for new and used cars remaining a core challenge.
It all comes as the impact from President Donald Trump’s autos tariffs and the abrupt ending of the federal tax incentive on purchases of electric vehicles will be fully realized in 2026, auto industry analysts said.
“Looking ahead to 2026, we expect continued market adjustment as consumers and dealers recalibrate to the new pricing reality without federal incentives” to sell EVs, added Stephanie Valdez Streaty, director of insights for Cox Automotive. “Automakers are responding by adjusting their product portfolio mix and moderating battery electric vehicle production levels to better align with demand.”
In fact, on Dec. 15, Ford announced it is redirecting $19.5 billion in capital away from EVs toward gasoline and hybrid powertrains. Still, Streaty said, “the long-term direction toward electrification remains clear — the future is electric. However, the timeline is being recalibrated.”
Throw in the renegotiation of the United States Mexico Canada Agreement, the free trade pact that replaced NAFTA during Trump’s first term, and 2026 will face some wild unknowns that could impact the industry.
Analysts at Cox Automotive and Edmunds gave their forecasts for new car sales and the industry for 2026. Both companies expect to see new and used vehicle prices continue to remain high, but stable, and overall industry sales decline given various challenges all automakers face. It will be the year when the K-shaped market — one in which high-income earners boom as low-income people face financial strain from inflation, stagnant wages and rising costs — becomes impossible to ignore.
“If you’re a high-income buyer with good credit, you’ll see choice, availability, and reasonable financing. That’s the good news,” said Erin Keating, Cox Automotive executive analyst. “But if you’re a median-income household considering a vehicle purchase, the decision is a bit tougher, as you might not have the confidence needed for a big-ticket item.”
And, with fewer households in the new vehicle market, the industry has transitioned to serving fewer, wealthier customers, Keating said, “that means lower industry sales, but still at volumes that can be profitable for the automakers.”
Most of the new vehicle sales results in 2025 were stronger than many people forecast, even as they are slowing near year-end.
“So 2026 should show us a bit of a slowdown across most key indicators,” Jeremy Robb, Cox Automotive’s interim chief economist said during a media call on Dec. 17.
Cox anticipates the 2025 U.S. new-vehicle sales will land at about 16.1 million cars sold, about flat with last year. Edmunds forecasts 2025 sales coming in slightly higher at 16.3 million.
For 2026, Robb said Cox’s estimate for new vehicles sales will dip 2.4% and come in at 15.8 million and he anticipates that a “high-15 million level may be the new norm for the industry given global factors and demographic trends.”
“Slower economic growth and job creation — and no EV tax incentive moving forward—will impact the auto market,” Robb said. “That translates to a lower new retail pace that’s down 1.5% year-over-year while fleet sales decline more sharply as slower growth limits demand.”
This year has been a volatile year for new car sales, in part due to Trump’s policies, which havehad a dramatic impact on the market, said Charlie Chesbrough, senior economist at Cox Automotive. In March, Trump implemented 25% tariffs on all imported vehicles and parts. In July, as part of the Big Beautiful Bill the $7,500 federal tax credit on EV purchases was voted to expire by the end of September. Most recently, Trump rolled back the strick fuel economy standards put in place by former President Joe Biden.
All those changes have created a volatile industry but “the role of changing policies has been a positive story for the new market with sales running ahead of last year’s pace for most of the year,” Chesbrough said. “A strong stock market supported vehicle demand, and concern about future higher prices led many potential vehicle buyers to purchase sooner rather than later.”
At Edmunds, Jessica Caldwell, who is the head of insights, writes in an industry analysis that she anticipates the “new-vehicle market is settling into a sustainable rhythm, with sales expected to reach 16 million in 2026 as pricing, inventory and days to turn stabilize.”
But affordability remains the defining force shaping the year ahead, Caldwell said, noting that “higher-income shoppers continue to drive demand for larger, higher-priced vehicles, while many price-sensitive buyers are being pushed toward used and off-lease options.”
Cox Automotive’s Executive Analyst Erin Keating explained why average transaction prices come in so high — close to $50,000. The average transaction price estimates the cost of the car, including destination fees, but not all incentives. It also reflects what people are buying, not what’s in inventory.
So as of early December, new cars priced under $40,000 represented over a third of available inventory. But that’s not what has been selling.
“The buyers who would have purchased it can’t afford new anymore,” Keating said of the $40,000 or less new car. “This isn’t everyone suddenly preferring SUVs. The people who can still afford new vehicles are buying what they actually want — larger, premium vehicles. Everyone else? They didn’t downgrade to a compact car. They left the new market entirely, buying used or hanging onto what they’ve got.”
Also, since the COVID-19 pandemic, financing costs have more than doubled as a share of household income, Keating said.
“We’ve achieved manageable monthly payments through term extension — households aren’t paying less, they’re paying longer,” Keating said. “So, the monthly payment looks affordable, but the total cost of the loan has gotten significantly worse.”
Keating said in the present economy it takes about 36 weeks of median income to afford the average new car. The feeling is this affordability problem will not improve next year.
“Even with affordable vehicles out there, fewer buyers are buying,” Keating said. “The consensus is that this shift isn’t temporary. The U.S. market, at current pricing dynamics, may only support a steady-state volume of 15-16 million units annually, representing a fundamentally smaller, wealthier market. That’s one reason dealer sentiment reflects concern. The missing customers aren’t sidelined, they’re essentially excluded.”
There is a bright spot and a few wild cards for next year.
Caldwell noted the easing interest rates as we head into 2026 will help consumers. In November, the average APR on a new-vehicle loan dipped to 6.6% — the lowest point of 2025, Caldwell said.
“That downward pressure on rates should continue into 2026 and could offer some relief on monthly payments, though it may not be meaningful for all buyers since strong credit remains essential for securing favorable terms,” Caldwell noted.
She noted the the “wild cards for pricing” are the policy environment and the supply chain as tariffs, rising material costs and “sporadic supplier disruptions are still in the mix, though they’ve been far less intense than what the industry experienced in 2022.”
Still, Jonathan Smoke, Cox Automotive’s chief strategy officer, said expect the “biggest twist in 2026” to be the USMCA renegotiation and tariffs should impact production decisions more, just as all the EVs coming off leases should enter the used market.
“This risks higher production costs for EVs with lower scale and tariffs meeting depreciation pressure with no incentives,” Smoke said. “The result could be democratization or value destruction or a combination of both. A shifting policy landscape is a new normal all of us will be dealing with.”
The outlook is not a definitively good or bad, he said, rather one of expect more change.
More: Automakers are raising new car costs — without touching sticker price
“There will be winners and losers across consumer spending, employment, EV adoption, and AIproductivity,” Smoke said. “The automotive market sits at the intersection of all five themes —navigating bifurcated demand, weak employment dynamics, rate uncertainty, technological disruption, and policy shifts that will reshape our competitive landscape in 2026 and beyond.”
Jamie L. LaReau is the senior autos writer for USA Today Co. who covers Ford Motor Co. for the Detroit Free Press. Contact Jamie at jlareau@freepress.com. Follow her on Twitter @jlareauan. To sign up for our autos newsletter. Become a subscriber.

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