New car prices are inching back up after hitting an all-time high of $50,612 in December 2025, according to Cox Automotive's Kelley Blue Book. In August, the average transaction price (ATP) paid for a new vehicle was $50,089 — the first time this year it topped $50,000. That's up 0.5% from July and 1.9% from a year earlier.
The Bureau of Labor Statistics' Consumer Price Index (CPI) — a measurement of inflation and prices paid by consumers — showed new vehicle prices rose 0.3% in August after a 0.1% increase in July and were 0.6% higher year over year.
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, partly because of what people are buying. The average sticker price (MSRP) has remained above $50,000 since April 2025. It was $51,852 in August, reflecting the popularity of higher-priced vehicles, like SUVs and pickups.
What about used car prices?
Used car prices surged during the pandemic and have remained elevated. The average listing price for a used vehicle was $27,239 in August — the highest monthly average since December 2022, according to Cox Automotive. That's up 7% from a year earlier and 0.9% from July's revised $26,999.
Higher used car prices have been driven by tight inventory and strong demand, particularly for older, more affordable vehicles. Shoppers on a tight budget face the most limited options. Vehicles under $20,000 made up less than a third of used car sales in the second quarter of 2026, down from more than half in 2019, according to Edmunds.
Cox Automotive reports that vehicles priced under $15,000 are selling especially fast. Dealers had only about a 29-day supply of those vehicles in August, compared with 44 days for the overall used car market, as sales outpaced inventory.
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 to 2025, according to Edmunds. More inventory could help to stabilize prices and provide more options, although many of them will be electric.
Why are cars so expensive to begin with?
New and used car prices are high for a list 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.
- Many buyers continue to gravitate toward larger, pricier vehicles. Full-size trucks and midsize SUVs are among the best-selling segments, and both carry higher price tags that pull the overall average up.
- 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/EV 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 one in five 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 2025-2028. 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.
Car ownership costs grew at a double-digit annual rate every month from April 2021 to November 2022, according to NerdWallet's ownership index. That growth has slowed dramatically, but the most recent data shows ownership costs grew 4% in the 12 months ending August 2026, owing largely to the increase in gas prices due to the war in Iran.
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, car prices aren't expected to decrease dramatically anytime soon. Delaying a purchase isn't likely to provide a significant cost benefit.
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 fell to 6.5% of the ATP in August, down from 7.2% a year earlier. EVs remain the exception: incentives on electric vehicles averaged 12% of the ATP, nearly double 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.
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- 1.Kelley Blue Book (Cox Automotive). Kelley Blue Book Report: Average New-Vehicle Transaction Price Moves Back Above $50,000 in August. Accessed Oct 1, 2026.
- 2.Bureau of Labor Statistics Economic News Release. Consumer Price Index Summary. Accessed Oct 1, 2026.
- 1.Kelley Blue Book (Cox Automotive). Kelley Blue Book Report: Average New-Vehicle Transaction Price Moves Back Above $50,000 in August. Accessed Oct 1, 2026.
- 4.Cox Automotive. Used-Vehicle Prices Reach Highest Level Since 2022 as Inventory Tightens in August. Accessed Oct 1, 2026.
- 5.Edmunds. The Vanishing Affordable Used Car: 3-Year-Old Used Vehicle Prices Top $32K Average in Q2. Accessed Oct 1, 2026.
- 4.Cox Automotive. Used-Vehicle Prices Reach Highest Level Since 2022 as Inventory Tightens in August. Accessed Oct 1, 2026.
- 7.Edmunds. Used Car Prices Approach Records, But Steeper Depreciation, Growing Off-Lease Inventory Offer Some Relief. Accessed Jun 15, 2026.
- 8.Experian. State of the Automotive Finance Market Report: Q2 2026. Accessed Oct 1, 2026.
- 9.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 Price Moves Back Above $50,000 in August. Accessed Oct 2, 2026.
- 8.Experian. State of the Automotive Finance Market Report: Q2 2026. Accessed Oct 1, 2026.
