As if 2025 wasn’t an odd enough year for car buyers, Cox Automotive data suggests that 2026 is already revealing an affordability issue for new vehicles.

Tariffs and the threat of rising prices cajoled countless car buyers into finally making the big purchase, leading to the strongest market in years.

U.S. 2025 new-vehicle sales

• GM: 2.83 million vehicles (+5.1% year over year); 17.3% market share
• Toyota: 2.52 million vehicles (+8.4% YoY); 15.5% market share
• Ford: 2.18 million vehicles (+5.6% YoY); 13.4% market share
• Hyundai: 1.84 million vehicles (+7.9% YoY); 11.3% market share
• Honda: 1.42 million vehicles (+0.6% YoY); 8.8% market share Source: Cox Automotive

Retail consumers spent $620 billion on new vehicles in 2025, according to Automotive World, citing J.D. Power data, a nearly 6% increase from the previous year. The increase was driven by a threat that never really materialized.

“Despite much speculation regarding major increases in new vehicle prices due to tariffs, the actual increases, as correctly predicted by J.D. Power, have been muted,” the firm said.

Still, after six straight months of strong results, new-car sales showed weakness in the third quarter and continued to decline in the fourth, according to Cox Automotive sales data.

Despite the slowdown, dealers sold 16.3 million new vehicles last year, a 1.8% year-over-year improvement that marked the best year since 2019.

But new data from Kelley Blue Book may give new car buyers pause as prices continue to trend higher.

New-car prices will remain out of reach for many in 2026.

Photo by blackCAT on Getty Images

New vehicle prices rise in January; average MSRP remains above $50,000

Consumers paid an average transaction price of $49,191 per vehicle in January, a nearly 2% increase from a year ago, according to Kelley Blue Book. January reversed the trend from December, when average transaction prices were down 2.2%.

Perhaps more concerning, however, is that the average manufacturer suggested retail price was 2.1% higher at $51,288. January marked the tenth consecutive month that new car average MSRPs topped $50,000, suggesting that prices this high are here to stay.

Related: Stop overpaying for these 5 new cars, says Consumer Reports

After spending much of the first half of 2025 using incentives to get tariff-weary consumers through the door, automakers have tapered their incentive spending in recent months.

In January, the average incentive package was equal to 6.5% of the ATP, or about $3,200. Last year’s January total averaged 7.1% of ATP.

“January’s pricing story is really a reminder of how much mix still matters in this market,” said Erin Keating, executive analyst at Cox Automotive.

“We hit a new January high even as prices naturally pulled back from December’s luxury-heavy finish. Consumers are still finding plenty of options below the industry average, especially in core segments like best-selling compact SUVs, but the disappearance of true entry-level vehicles continues to lift the floor higher.”

More Americans take out 84-month car loan terms

Car manufacturers relied on incentive pricing to help address consumer affordability concerns in 2025.

Ford rode dealer incentives, combined with consumer anxiety about tariffs, to become the top-selling brand in the U.S. during the year’s first half. Ford said total sales in the second quarter rose at a rate seven times that of the overall auto industry. 

However, as the year progressed and the tariff situation became clearer, incentive spending declined.

Related: 5 hot new cars to avoid at all costs, and 5 alternatives to consider

The average manufacturer’s incentive spend per vehicle in December was $3,433, representing just a $77 increase from the same period a year ago. Incentive spending on average represents about 6.5% of a vehicle’s MSRP, a 0.1% increase.

To make up the gap, more customers are resorting to extended 84-month loan terms, which accounted for 10.1% of financed sales in December, according to J.D. Power.

That is the second-highest level on record for the month after 2021.

U.S. car buyers are spending too much on driving

Most financial experts recommend spending no more than 15% of your monthly income on a vehicle.

In addition to capping your car payments at about 15% of your monthly take-home pay, financial experts also recommend that shoppers aim for a 20% down payment, a 36- to 48-month loan term, and expenses (including insurance) at between 8% and 10% of your gross monthly income.

According to a MarketWatch Guides survey, about 10% of drivers say they spend 30% of their monthly income on driving, while another 12% said they “found themselves living paycheck to paycheck due to the financial strain of their cars.”

Nearly half of American drivers cite car expenses as the reason they can’t save any money, and the average American spends about 20% of their monthly income on auto loans, fuel, insurance, and maintenance. 

A Bank of America survey from this summer found that among households with a monthly car payment, 20% have a payment over $1,000.

Related: Consumer Reports top-5 vehicles to buy this President’s Day