New car prices are nearing a record again. In September, the average transaction price (ATP) paid for a new vehicle was $50,562 — just $52 below the all-time high of $50,614 set in December 2025, according to Cox Automotive’s Kelley Blue Book. This was the fourth monthly increase in a row.
The Bureau of Labor Statistics’ Consumer Price Index (CPI), a measure of inflation and the prices consumers pay, showed new vehicle prices rose 0.2% in September after a 0.3% increase in August. They were 0.6% higher than a year earlier.
Today’s prices are the result of a sharp rise that began during the COVID-19 pandemic, when supply chain disruptions and semiconductor chip shortages slowed vehicle production. They’ve stayed elevated since, but annual increases have slowed, partly because of what people are buying. More shoppers are choosing less expensive vehicles, like subcompact SUVs, compact cars and small or midsize pickups, which helps keep the average price down.
Cox Automotive executive analyst Erin Keating said in a press release, “Consumers don’t buy the industry average. They buy a vehicle, and prices for many of the vehicles they’re shopping are continuing to move higher. What’s keeping the overall average transaction price increase relatively modest is mix. Affordability pressures are pushing more buyers toward lower-priced vehicles and segments, which tempers the industrywide number even as prices for individual vehicles rise.”
What about used car prices?
Used car prices surged during the pandemic and have remained high. The average listing price for a used vehicle was $27,235 in September — the highest monthly average since December 2022, according to Cox Automotive. That's up nearly 6% from a year earlier.
Strong demand has kept used car prices high, and budget shoppers are feeling it most. Affordable vehicles are in short supply. Dealers had only a 34-day supply of used cars priced under $15,000 in September, compared with 49 days for the overall market. Inventory in that price range was down 16% from a year earlier, according to Cox Automotive.
There could be some relief ahead for used car shoppers, though. When drivers return leased vehicles at the end of their contracts, those cars often end up for sale on used car lots. In recent years, there was a shortage of off-lease vehicles, but this pipeline is expected to grow by nearly half a million units in 2026 compared with 2025, according to Edmunds. More inventory could help to stabilize prices and provide more options, although many of these cars will be electric.
Why are cars so expensive to begin with?
New and used car prices are high for a number of reasons.
The COVID-19 pandemic slowed and in some cases halted vehicle production, causing new and used car prices to skyrocket. Prices have never fully returned to pre-pandemic levels.
Ongoing inflation has increased manufacturing and labor costs, which automakers and dealers have in some instances passed on to buyers.
Tariffs on vehicles remain in effect. However, the broad price spike many expected hasn't fully materialized, as many automakers have absorbed the costs rather than passing them directly to consumers. The increases that have occurred have been model-dependent.
Many new cars now come with advanced technology, larger infotainment screens, driver-assistance systems and hybrid or electric vehicle powertrains — all adding to the cost.
What about auto financing rates and payments?
On top of paying high car prices, car buyers who finance have faced elevated interest rates and payments since the pandemic. Auto loan interest rates have decreased some since last year, but only slightly. The average annual percentage rate (APR) for new-vehicle purchases was 6.35% in the second quarter of 2026, down from 6.79% the same time last year, according to Experian's State of the Automotive Finance Market report.
Experian's report shows the average car payment was $765 for a new car and $542 for a used one in the second quarter of this year. Nearly 1 in 5 new car loan payments — 18.31% — topped $1,000 per month in the same quarter. To manage payments, buyers are increasingly turning to longer loan terms. More than a third of new vehicle loans (34.43%) in the second quarter carried terms longer than six years, up from 31.71% a year earlier.
The "one big, beautiful bill," which was signed into law in July 2025, includes an auto loan interest tax deduction, which is intended to help with vehicle affordability. Auto loan borrowers can deduct up to $10,000 a year for car loan interest for tax years 2025-28. The deduction is available only for new cars with final assembly in the U.S., and the vehicle must be for personal use.
The deduction can be taken by people who claim the standard deduction as well as those who itemize. It will begin to phase out for individuals with modified adjusted gross incomes over $100,000 ($200,000 for joint filers).
Car ownership costs
The upfront price of cars hasn’t been the only financial pain point for consumers, as shown by the NerdWallet Vehicle Ownership Costs Index, which is a measurement of inflation and spending figures from the BLS.
Is now a good time to buy a car?
While it isn’t necessarily a good time to buy a new or used car due to historically high prices, delaying a purchase isn't likely to provide a significant cost benefit. Car prices aren't expected to decrease dramatically anytime soon.
If you proceed with buying a new car, look for incentives — though they're getting harder to find. Kelley Blue Book reports that incentive spending by automakers was 6.6% of the ATP in September, down from 7.3% a year earlier. Electric vehicles remain the exception: incentives on EVs averaged 11% of the ATP, the lowest level of 2026 but still well above the industry average. Shoppers open to an EV may find more incentives and room to negotiate price.
If you are someone who simply can't fit a high car payment into your budget right now, and you can delay buying a car, that could be your best option. Focus on paying down other debt and saving toward a larger car loan down payment, if possible.
Also, if you do move forward with financing a car and interest rates fall after your purchase, look into refinancing your car to a lower rate later. In the second quarter of 2026, borrowers who refinanced saved an average of $83 a month, according to Experian.
How to find the best deal on a car
To increase your chances of finding a car that meets your needs at the best price, here are some tips to follow.
Shop around and be flexible about make and model. Some models and trim levels are being affected by tariffs more than others. Also, previous-year models may be a better deal than new models.
Look at auto manufacturer websites for incentives and any special pricing promotions.
Check online pricing guides, such as Kelley Blue Book, Edmunds or NADA guides, to know what price you should pay.
If financing, know the ins and outs of getting a car loan, so you can get more favorable terms.
Compare auto lenders to find the best rate.
Use an auto loan calculator to determine the best scenario — loan amount, interest rate, term and down payment — for a monthly payment that fits your budget.
Article sources
- 1.Kelley Blue Book (Cox Automotive). Kelley Blue Book Report: Average New-Vehicle Transaction Prices Flirt with All-Time High, Despite Trend Toward More Affordable Product. Accessed Oct 16, 2026.
- 2.Bureau of Labor Statistics Economic News Release. Consumer Price Index Summary. Accessed Oct 16, 2026.
- 1.Kelley Blue Book (Cox Automotive). Kelley Blue Book Report: Average New-Vehicle Transaction Prices Flirt with All-Time High, Despite Trend Toward More Affordable Product. Accessed Oct 16, 2026.
- 4.Cox Automotive. Used-Vehicle Inventory Builds as September Sales Pace Slows. Accessed Oct 16, 2026.
- 4.Cox Automotive. Used-Vehicle Inventory Builds as September Sales Pace Slows. Accessed Oct 16, 2026.
- 6.Edmunds. Used Car Prices Approach Records, But Steeper Depreciation, Growing Off-Lease Inventory Offer Some Relief. Accessed Oct 16, 2026.
- 7.Experian. State of the Automotive Finance Market Report: Q2 2026. Accessed Oct 1, 2026.
- 8.IRS.gov. Working Families Tax Cuts: Tax deductions for working Americans and seniors. Accessed Aug 7, 2026.
- 1.Kelley Blue Book (Cox Automotive). Kelley Blue Book Report: Average New-Vehicle Transaction Prices Flirt with All-Time High, Despite Trend Toward More Affordable Product. Accessed Oct 16, 2026.
- 7.Experian. State of the Automotive Finance Market Report: Q2 2026. Accessed Oct 1, 2026.
