When Will New Car Prices Drop?

Quick Facts About New Car Prices

• The new vehicle average transaction price (ATP) in May was $49,220, down slightly from April and up 1.2% from one year earlier. 
• May showed generally balanced inventory levels and a small increase in overall volume as manufacturers continue to balance inventory and demand.
• Despite a slight decrease in ATP, the landscape for buying a new vehicle remains stable. Prices continue to rise moderately year over year, with greater increases in the SUV and pickup truck segments.

If you’re in the market for a new vehicle, the new-vehicle average transaction price (ATP) was $49,220 in May. This represented a restrained 0.5% decrease from April and a 1.2% year-over-year increase. While midsize SUV and pickup truck segments have been driving much of the recent growth in ATP, May also saw notable year-over-year increases in the subcompact and compact SUV segments, up 4.2% and 3.4%, respectively.

Sales incentives increased in May to 7.1% of ATP, up from 6.9% in April, but remained relatively flat compared to this time last year. Automakers appear to be maintaining a disciplined approach to incentive spending, though it remains highest for electric vehicles (EVs), many luxury segments, compact cars, and full-size pickups. If you are shopping in one of those segments, you may have some luck landing a good deal.

In short, May saw steady inventory, increased sales, and a tighter days’ supply. Despite inflation concerns, subdued consumer confidence, and household budget tightening for many, the market remains balanced, and demand continues to hold up. If you’re looking to buy in any of the SUV segments or the full-size pickup segment, you’ll find less inventory and stiffer pricing. Other segments may have more incentive options to explore. Read on for expert insights into what’s driving the current trends and what you need to know if you’re planning to start your search or buy a car now. 

• New Car Prices Continue Modest Increases
• The State of Electric
• New Car Inventory Update
• Shop Around for the Best Offer on Your Trade-in
• The Higher Costs of Car Insurance
• What to Expect: Looking Ahead

New Car Prices Continue Modest Increases Year Over Year

The new vehicle ATP in May was down 0.5% from April. May’s $49,220 ATP was up a subdued 1.2% year over year but still below the long-term average of approximately 3.6%. With these numbers, it can be more helpful to take a segment-specific look to better understand the full picture:

• 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

“Average transaction prices are rising 2–4% year over year across key vehicle segments, powered by a convergence of product cycles and supply dynamics,” explained Cox Automotive’s Executive Analyst Erin Keating. “Redesigned SUVs from Toyota, Kia, Jeep, and Hyundai are commanding higher prices out of the gate, while Ford’s F-Series production constraints are tightening truck inventory, lifting average transaction prices, with freshened Ram pickup stepping in to capture buyers at the premium end.” In contrast, the compact car segment is seeing the lowest year-over-year increases in ATP, at just 0.7%.

Throughout 2026, we’ve seen improving retail sales momentum, and May showed the strongest sales of the year so far. Incentive spending also increased month over month, from April’s 6.9% of ATP to 7.1% in May, and was up modestly year over year, with May 2025 incentives at 6.8% of ATP. Segments with the highest incentive spending were EVs, many luxury segments, compact cars, and full-size pickups.

“The market looks balanced, but it is not broadly comfortable,” said Keating. “Demand is still holding up better than many expected, supported in part by a solid labor market and wealth effects at the higher end, yet elevated financing costs and household budget pressure continue to cap how far that strength can carry.”

With ongoing conflict in the Middle East and rising economic pressure on the average household, we continue to keep a close watch on consumer sentiment. Despite moderated pricing, external socioeconomic factors may “still mean many consumers do not experience this market as meaningfully easier,” explained Keating.

MORE: Explore Kelley Blue Book’s Car Affordability Information Center for curated articles designed to help you make smart, budget-friendly decisions.

The Electric Landscape Sees Some Stabilization in May

New electric vehicle (EV) sales saw increases in May, totaling an estimated 84,746 units. This number was down 21.9% year over year but up 10.3% month over month, with EVs accounting for 5.7% of total new vehicle sales. Tesla continued to lead the pack with 40,578 units sold, though its market share fell to 47.9%, down from April. Hyundai, Cadillac, Toyota, and Chevrolet followed in sales. However, Chevrolet and Rivian saw month-over-month declines.

Inventory levels for new EVs continue to tighten. Overall days’ supply fell to 71 in May, and inventory sat more than 40% below levels from a year earlier. This suggests continued tightening rather than renewed oversupply. Inventory levels also continue to vary widely by brand. Hyundai, Cadillac, Ford, and BMW all saw declines in days’ supply from last month, suggesting stronger sales volumes and careful inventory management.

Average ATP for a new EV stood at $54,532 in May, down 0.5% month over month and 4.0% year over year. Incentives averaged $7,611, remaining elevated and representing 14.0% of ATP. In May, Tesla continued to exert downward pressure on industry ATP, with a 1.0% month-over-month decline and a 3.4% year-over-year decline. Supporting pricing was a combination of sales declines in lower-priced, high-volume entries, such as Chevrolet, alongside improved volume in several mid- to higher-priced EV models, such as Cadillac and BMW.

“New-EV sales are expected to trend slowly higher over time as new products reach the market and elevated incentives continue to support sales,” said Cox Automotive Director of Industry Insights Stephanie Valdez Streaty. “Still, the path forward will remain uneven—as it has throughout the transition—driven by inconsistent consumer demand and shifts in automaker strategies.”

What Drives New Car Prices

New car prices are not established by any single factor, but rather, reflect a complex interplay between the following:

When any one of these factors shifts, the others may adjust to accommodate the impact.

New Car Inventory Update

Dealerships track the number of new vehicles they have on hand to sell using a metric called “days’ supply,” or how long it would take them to sell out at today’s sales pace if they stopped adding new vehicles. According to Cox Automotive’s vAuto Live Market View, new car inventory data for May showed 76 days’ supply, down from April’s 78 days’ supply. Inventory levels remained stable while continuing to stay in a narrow range. This reflects automakers deliberately rebalancing inventory as they clear out 2025 model-year vehicles.

Total available inventory rose in May to 2.89 million units, up from April’s 2.86 million and up 13% year over year. Despite this rise, “The broader pattern remains one of steady supply rather than renewed accumulation,” said Keating.

We continue to see Toyota, Lexus, and Honda with the lowest days’ supply and highest demand. At the other end of the spectrum are Stellantis brands, with Chrysler, Ram, Jeep, and Dodge continuing to post high levels of days’ supply as inventory growth outpaced demand. It’s clear that where sales are working, there is a tighter supply and vice versa, where sales volume is not clearing inventory quickly enough.

What does this mean for car shoppers? The short answer is: there’s no significant change from where we have been for most of this year. In the SUV and truck segments, prices continue to rise, and demand remains high. It can be more difficult to locate exactly what you want, especially from brands with particularly low days’ supply, and you likely won’t be driving any hard bargains on these vehicles. Those shopping in other segments, however, may find more attractive incentives and less pressure to make quick decisions.

Shop Around for the Best Offer on Your Trade-in

Trade-in value is another factor driving car prices. A lack of used-vehicle stock has kept prices higher, giving credence to the idea that buying a new vehicle can sometimes be cheaper than purchasing a used model that’s only a few years old. As a result, it’s still a great time to trade in your car. 

Dealers value your trade-in partly based on what they need in stock, so if you have a popular model, you may be in luck. On the other hand, they’re more likely to offer an excellent deal to buyers on a car that fewer people are currently looking for. In other words, a car shopper trading in a 2018 Honda Civic for something else may be much happier with the trade-in appraisal than a shopper trading in a 2021 Jeep Grand Cherokee. 

Car buyers should prepare to shop around their trade-in. It requires another step, but selling your old vehicle to one dealership and buying your new car from a different one may make sense if the final invoice numbers work out in your favor. Use the Kelley Blue Book Instant Cash Offer tool to shop your trade-in vehicle at nearby dealerships. When you let the deals come to you, selecting the best trade-in offer for your situation is easier. Remember, you can always negotiate the offer, and pitting one offer against another is not unheard of when shopping for a vehicle. 

What to Expect: Looking Ahead

New-car inventory in May was up modestly from April and up 13% year over year. May numbers showed the number of available new vehicles in the U.S. hitting 2.89 million units, or 76 days’ supply. This is a notable decline from January and February’s numbers in the 90s, but the year-over-year increase is sharp. This shift is mostly explained by tariff concerns last spring, which fueled accelerated sales. Automakers still contend with tariffs and conflict across the Middle East, suggesting a continuing need to balance steady inventory management with smart pricing. 

For buyers, the situation has not shifted significantly one way or another. Options in lower pricing bands remain limited, though careful shoppers can still locate incentives that can help lighten the financial burden. We will continue to monitor the war’s impact into the summer and the effect of skyrocketing fuel costs on the market.

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What to Do if You Need a Car Now

Incentives are a buyer’s best friend in this current market. If you can adjust your expectations about the type of car or brand you are willing to buy, there may be some good deals available. Beyond that, prices remain on a steady, modest increase. Before buying: 

• Research your options and expand your boundaries if needed.
• Look for deals and incentives, especially on inventory that dealers may be trying to offload to clear room for newer incoming models.
• Shop ahead for a car loan if you’re not paying cash.

RELATED: Paying Cash for a Car: Consider the Pros and Cons

Editor’s Note: We have updated this article since its initial publication.