Will Car Prices Drop in 2026?

Will New Car Prices Drop in 2026?

New car prices in 2026 will likely see modest decreases, though dramatic price drops are unlikely. Here's what's driving the market:

Factors Pushing Prices Down

Normalized inventory levels are the biggest factor working in buyers' favor. When dealers have 60+ days of inventory, they're motivated to move metal. This creates negotiating room that simply didn't exist in 2022-2023 when cars were selling before they hit the lot.

Return of manufacturer incentives is another positive sign. We're already seeing 0% APR offers, cash back deals, and lease specials returning to the market. By 2026, expect these incentives to be more widely available across brands and models.

Increased competition from EVs is forcing traditional automakers to price more competitively. As Tesla cuts prices and Chinese EV makers enter the market, even gasoline vehicle prices face downward pressure.

Factors Keeping Prices Elevated

Despite the positive trends, several factors will prevent a return to pre-pandemic pricing:

• Increased technology requirements: New safety features, emissions standards, and connectivity requirements add cost
• Labor costs: UAW contract gains will add approximately $800-$900 per vehicle for Detroit automakers
• Raw material prices: Battery metals and other materials remain elevated compared to 2019
• Mix shift: Automakers are prioritizing higher-margin trucks, SUVs, and luxury vehicles

New Car Price Predictions by Segment

Will Used Car Prices Drop in 2026?

The used car market has more room for price decreases than new cars. After hitting peak insanity in early 2022—when used cars were sometimes selling for more than their original MSRP—the market has been gradually normalizing.

Why Used Car Prices Will Continue Falling

New car availability is the primary driver of used car prices. When buyers can actually find new cars at reasonable prices, fewer are forced into the used market. This reduces competition for used vehicles and brings prices down.

Fleet returns are increasing. During the pandemic, rental car companies sold off their fleets. Now they're rebuilding and will eventually return those vehicles to the used market, increasing supply.

Lease returns are normalizing. The 2021-2022 period saw fewer leases written due to inventory shortages. As normal leasing patterns resume, more off-lease vehicles will enter the used market in 2024-2026.

Best Used Car Deals in 2026

Certain segments will see bigger price drops than others:

• Luxury sedans: Expect 15-20% below peak pricing as depreciation catches up
• Early EVs: First-generation electric vehicles will depreciate significantly due to battery concerns and newer, better options
• Rental fleet vehicles: High-mileage, well-maintained rental returns offer value
• Trucks and SUVs: More modest declines of 5-8% as these remain in high demand

Electric Vehicle Prices in 2026

Electric vehicles represent the biggest opportunity for price decreases in 2026. Several factors are converging to make EVs more affordable:

Battery Cost Reductions

Battery pack costs have fallen from over $1,000 per kWh in 2010 to around $139 per kWh in 2023. Industry analysts expect this to drop below $100 per kWh by 2026, representing massive savings on the most expensive EV component.

Increased Competition

Tesla's aggressive price cuts in 2023-2024 forced competitors to respond. By 2026, expect:

• Entry-level EVs under $25,000 from multiple manufacturers
• Mainstream EVs in the $30,000-$40,000 range with 300+ miles of range
• Continued price pressure from Chinese EV makers

Federal Tax Credits

The $7,500 federal tax credit for qualifying EVs effectively reduces purchase prices. More vehicles are expected to qualify by 2026 as domestic battery production increases. Combined with state incentives, total savings can reach $10,000-$15,000.

Best Time to Buy a Car in 2026

Regardless of overall market trends, timing your purchase strategically can save thousands. Here are the optimal windows for car buying in 2026:

End of Month / End of Quarter

Salespeople and dealers have monthly and quarterly quotas. Shopping in the last week of the month—especially March, June, September, or December (quarter ends)—gives you maximum leverage as they push to hit targets.

Holiday Weekends

The best holiday weekends for car buying in 2026:

• Presidents' Day (February): Winter sales events with good incentives
• Memorial Day (May): Major sales event with manufacturer support
• 4th of July: Mid-year clearance deals
• Labor Day (September): Model year-end clearance begins
• Black Friday/Cyber Monday: Increasing importance for car deals

Model Year-End (August-October)

When 2027 models arrive, dealers need to clear 2026 inventory. This period offers the deepest discounts on outgoing models—often $3,000-$8,000 below MSRP on popular vehicles.

Should You Wait Until 2026 to Buy a Car?

This depends on your individual situation. Consider these factors:

Wait If...

• Your current vehicle is reliable and meeting your needs
• You're interested in an EV (prices dropping fastest)
• You can time your purchase for model year-end clearance
• You have good credit and can qualify for promotional financing

Buy Now If...

• Your current car has safety or reliability concerns
• You're facing expensive repairs that exceed the car's value
• You find an exceptional deal on exactly what you want
• Your lease is ending with unfavorable buyout terms

The bottom line: Waiting for the "perfect" time to buy a car is like timing the stock market—nearly impossible. Instead, focus on negotiating the best deal whenever you're ready to buy. A well-negotiated purchase today beats a poorly-negotiated purchase in 2026.

Frequently Asked Questions

The Bottom Line

Car prices in 2026 will be more favorable for buyers than 2022-2024, but don't expect a return to 2019 pricing. New cars will see modest decreases of 2-5%, used cars will drop 5-10%, and EVs offer the best opportunity for savings with potential decreases of 10-20%.

More important than timing the market perfectly is negotiating effectively when you're ready to buy. Know the fair price, identify dealer markups and add-ons, and don't be afraid to walk away from a bad deal.