Quick Facts About the Buying and Selling Marketplace
- In May 2026, the average new car sold for $49,220, a slight decrease from April’s average.
- Used car prices rose slightly in May, but inventory is rising.
- It hasn’t been this easy to qualify for a new car loan in nearly four years.
High car prices have been a constant in the headlines throughout 2026, but the final sale price of the average new car dropped slightly in May.
Those high price headlines can make car shoppers feel a little fatalistic. But they’re slightly misleading. The average is high, in large part, because Americans are choosing to pay more. Luxury cars and luxury trim levels on pickup trucks push up the average. Savvy shoppers can still find a quality car for much less than the average.
The used-car market is a more complicated story: Prices rose in May even as supply increased.
We’re also beginning to see a change in how Americans shop for cars, thanks to spiking gas prices. Recent research from Kelley Blue Book parent company Cox Automotive shows that 76% of car shoppers say gas prices are influencing the type of vehicle they’ll consider. Shopping for hybrids on KBB.com has jumped 25% compared to the fourth quarter of last year. Electric vehicle (EV) shopping is up 20%.
We’ll explain what to expect when buying a new or used car, or selling or trading one in, and why it might make sense to act quickly.
- What New Car Shoppers Can Expect
- Each Automaker Is Responding Differently
- What Used Car Shoppers Can Expect
- Older, Less Expensive Cars Harder to Find
- Automakers Build More Expensive Cars
- How to Buy a Car Right Now
- Selling a Car Right Now
- Trading in a Car Right Now
- Looking Ahead
- Tips for Buying a Vehicle Right Now
What New Car Shoppers Can Expect
New car buyers paid an average of $49,220 in May, $236 less than in April. The figure is just 1.2% higher than last May. In a typical month, we see year-over-year inflation of 3% or more.
Automakers and their dealers offered incentives worth 7.1% of the average transaction price last month.
It’s also a slightly misleading number. You don’t have to spend that much. Much of the price increase making headlines is actually under your control as a shopper.
Americans continue to spend more than they need to on transportation. Luxury vehicles have made up nearly 20% of the market for much of the last year, and buyers often choose luxurious, well-equipped trim levels on even reasonably affordable cars. All of the major gas-powered full-size pickups, for instance, have starting prices in the low $40,000 range. But the average full-size truck buyer spent more than $66,000 last month.
By segment, the story is more nuanced:
- Midsize SUV: $50,185, up 2.9% year over year
- Compact SUV: $37,757, up 3.4% year over year
- Full-size pickup truck: $66,288, up 2.4% year over year
- Subcompact SUV: $31,122, up 4.2% year over year
- Compact car: $27,443, up 0.7% year over year
While it’s almost always tempting to spring for the best model available, it’s still possible to save money. Try to choose only as much car as you really need, and be open to brands with more supply on dealers’ lots.
Dealers generally aim to keep a 60-day supply of new cars on the lot and up to 15 days on order. The average automaker was just about on target last month. But an average can be made up of extremes — some automakers were well above the average, which could bring more deals and lower prices.
Each Automaker Is Responding Differently
In 2025, big swings in tariff policy complicated decisions for automakers and dealers. Each automaker has responded to tariffs differently. As long as the tariffs remain, those responses will likely shift constantly.
Imported vehicles have seen the largest price increase, estimated at $5,000 to $8,900 per vehicle. Domestic vehicles are not exempt from the tariff burden. Due to tariffs on imported supplies, such as steel and aluminum, domestic vehicle costs have increased by $1,600 to $2,000 per vehicle.
RELATED: How Each Automaker Is Responding to Tariffs
Automakers have absorbed some of the cost of tariffs for a while. They might even respond by raising the price of one car to help pay for the tariff on another.
With so much constantly shifting, your best tool for understanding local price changes is the Kelley Blue Book Fair Purchase Price, which we calculate using recent transactions for that car in your area. We update each Fair Purchase Price weekly, showing you how tariffs and tariff anxiety are impacting the prices of the specific vehicles you’re shopping for where you live.
Loan Conditions Continue to Improve
Prices are all that cash buyers need to worry about. However, few car shoppers are cash buyers. Most Americans borrow money to buy a new car.
On that front, the news is good. Qualifying for a car loan is now easier than ever.
Most Americans buy cars on credit, and the good news for May is that lenders approved 72.4% of applications. They asked for an average down payment of just 13.5%.
There are warning signs in the data — nearly 6 in 10 buyers now fold some negative equity from an old loan into their new loan. But qualifying is unlikely to be easier anytime soon.
It’s difficult to predict how long rates will stay where they are. The Federal Reserve held its federal funds rate steady at its last meeting, and its board members disagree on what they should do next.
What Used Car Shoppers Can Expect
The average used car sold for $26,918 in May — 6% higher than a year ago and the highest average since mid-2023.
That kind of increase may not last. Dealers are rebuilding inventory from a low-supply spring. The average dealer now has a 45-day supply of used cars to sell, which should be enough to keep supply and demand relatively balanced in mid-summer.
Long-term trends, however, still work against the used car shopper.
Americans are holding onto their cars for much longer, and automakers have been producing fewer cars for several years. That means fewer available used cars and higher prices for the units sitting on dealers’ lots.
MORE: 1926: The Used Car Market Got a Pricing Foundation
Older, Less Expensive Cars Are Harder to Find
If you hope to find an older vehicle and your budget is less than $15,000, these cars remain in short supply. Dealers have few of those in stock.
However, the tariff threat could push used car prices higher. When new car prices rise, would-be new car shoppers head to used lots looking for something still in their price range. More would-be new car shoppers start buying up the available used vehicles, drawing down inventory. Plus, Americans are holding onto their cars longer than ever. The average vehicle on American roads is 12.8 years old. Automakers also produced fewer cars for several years after the 2008 recession, leaving fewer higher-mileage, older used vehicles available to sell.
The most accessible used cars carry prices between $15,000 and $30,000. The top five sellers in May had an average price of $25,043, approximately 7% below the average listing price for all used vehicles sold.
Once again, Ford, Chevrolet, Toyota, Honda, and Nissan were the top-selling brands, accounting for nearly 50% of all used vehicles sold.
Automakers Build More Expensive Cars
If you haven’t been car shopping in a while, the cars on offer may surprise you.
In recent years, inexpensive cars have grown scarce. Recent analysis finds that sales of vehicles priced at $25,000 or less have fallen by 78% in just five years. Six years ago, automakers offered 36 new models in that price range. Today? Four.
At the other end of the scale, in 2017, they built 61 models priced at $60,000 or more. This year, they built 114.
Dealers are pushing back, telling automakers they need more mainstream cars to sell, but correcting the problem will take time.
How to Buy a Car Right Now
New car prices remain about $8,000 higher than five years ago, dating back to the COVID-19 pandemic. That’s when the average transaction price for new vehicles was just under $41,000. However, with all the technological advances and offerings, your next car will likely last longer and help you drive safer than ever.
RELATED: Buying Older, Used Cars in 2026
Vehicle quality studies repeatedly show that today’s new cars suffer fewer problems than those from just a few years earlier. Buyers of higher-priced used cars will likely see those vehicles stay on the road even longer. The same goes for those buying new ones.
With most automakers now building such durable cars, they compete by adding more high-tech features. Features like adaptive cruise control and Apple CarPlay are now more common than ever on entry-level vehicles. Read on for our tips on buying a car right now.
How to Leverage Incentives to Buy a New Car
Last month, car incentives comprised about 7.1% of the average deal. To learn how to take advantage of incentives, read about our monthly best car deals to find dealer or manufacturer offers, including cash back and lower interest rates for financing your next vehicle.
RELATED: How to Buy a New Car in 10 Steps
Selling a Car Right Now
Few of us can sell a car without needing to buy a replacement. If you can sell now, what are you waiting for? You could get more for your vehicle if it’s in high demand, and that’s excellent news. The best way to get the most money for your used car is to sell it privately. But if you don’t want the hassle, there is still an opportunity to sell to a dealership.
PRO TIP: If you’re selling a car, consider selling it peer-to-peer using Kelley Blue Book’s Private Seller Exchange marketplace. It’s a low-cost method that helps consumers earn more on their vehicles than they would by selling to a dealership.
Trading in a Car Right Now
The ongoing shortage of used cars will be with us for years. As a result, you’ll likely still see respectable offers for your used car this month.
Searching for a decent price for your trade-in is still a good idea. Shop around. Each dealership tries to keep a balance of vehicles on its lot. Sometimes, the one you want to buy from doesn’t need your trade-in desperately, but a competitor does.
Research your vehicle’s Kelley Blue Book value, then call several local dealerships to see what they’ll offer you for it. Or try our Instant Cash Offer tool, which brings you deals from various dealerships without obligation. You can choose your preferred offer or use it to negotiate with others.
Is Trading in Your Vehicle a Good Idea?
Possibly. You could get more money than usual if your vehicle is in high demand. It will help defray the costs of buying a new or used car. However, if your vehicle is not in high demand, you can expect to get close to the Kelley Blue Book value. Use Kelley Blue Book’s car valuation tool to find out the price of your new or used car.
Can You Trade in a Vehicle That’s Not Paid Off?
Yes. Whether you have paid off your car or not, you can still trade it in. However, a car depreciates when you drive it out of the dealership. It’s best to take stock of how much equity you carry in the vehicle. Take the difference between the car’s current market value and what you owe to figure that out. Read our story on selling a car.
Looking Ahead
New car prices crossed the $50,000 line late last year and are likely to do that again this year. Automakers will eventually have to address the yawning gap at the low-cost end of the car market. But they’re being conservative with their business decisions now, with few willing to take the risk of designing cheaper cars when the expensive ones are selling so well.
Used car prices, barring any unusual disruptions to the market, should increase only slightly.
If you need a new car soon, it might make sense to act now while prices remain steady.
RELATED: 10 Best Used Car Deals
Tips for Buying a Vehicle Right Now
If you shop right now, we recommend a few strategies to help you find the right new or used car that fits your budget.
- Expand your search. Widen your search to a broader geographic area because you could find a better deal or the used car you want outside your immediate area.
- Stay patient. Call dealerships to see what’s in stock for those high-demand vehicles. Leave a refundable deposit if you want first dibs.
- Buy a less expensive model. With higher car loan interest rates, consider buying a cheaper vehicle model instead of a more expensive one in the lineup you’re considering. Understand how much you can afford.
- Look for deals. Make sure to research car deals to find what works best for you. It may involve contacting or visiting several dealerships as you search for the right fit.
- Weigh your options. Don’t just look for a car; search for the best interest rates from banks or credit unions. Also, shop for insurance rates before the deal to know how much higher auto insurance will cost for your desired vehicle. Then, weigh all your options, including financing incentives and deals at the dealership, if that’s where you buy your next vehicle. Also, you may find that the prices of some newer-model used vehicles are almost the same as new cars. Just keep all your options open during your search.
- Avoid dealer markups. If you see a markup (sometimes called a “market adjustment”) on your final invoice, ask the dealer to remove it. If they refuse, shop at another dealership. Markups were more prevalent during the COVID-19 pandemic. However, dealers still mark up some vehicles that are in short supply.
- Question all add-ons. If your sales summary includes entries like “window tint,” “fabric protection,” “carpeted floor mats,” and other add-ons you didn’t request, ask the dealer to remove those line items from your invoice. Many dealers tack on these extras to make quick profits.
It may make more sense to keep your existing car for another year or two. If you must buy, be prepared to take excellent care of your next car to keep it running for a long time.
Editor’s Note: We have updated this article since its initial publication.
