Quick Facts About New Car Prices
- Car prices are climbing, but dealer incentives are keeping them in check.
- Cox Automotive’s Erin Keating says pent-up demand is mostly coming from high-net-worth households.
- Prices remain about $10,000 higher than five years ago.
- Shoppers could find great deals on overstocked cars from brands like Land Rover, Ram, Lincoln, Audi, and Mitsubishi, but not necessarily on understocked Toyota, Lexus, and Honda vehicles.
If you’re in the market for a new vehicle, don’t expect to see car prices dropping anytime soon. The good news: They’re not climbing much either, even with new tariffs in play. Car industry experts expected a surge in prices due to lower inventory, fewer incentives, and added tariffs. So far, that spike hasn’t happened, making it a great time to shop for a new car, especially as 2026 models roll in.
According to experts at Kelley Blue Book parent company Cox Automotive, carmakers haven’t significantly raised the manufacturer’s suggested retail prices (MSRPs), car buying demand is mostly coming from high-net-worth households, and government policies are still evolving. So, while the market is uncertain, you’re not facing a major vehicle price hike — at least for now.
Read on for expert insights into what’s driving the current pricing pressure and what you need to know if you’re planning to start your search or buy a car now.
- New Car Prices Increase Modestly
- 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 Increase Modestly
Even as the sales pace began slowing, Kelley Blue Book data shows average transaction prices were $48,841 in July, or flat from the month earlier. They rose 1.5% from a year ago. Incentives to attract shoppers to new vehicles jumped to 7.3%, or nearly $3,550 on average. That’s the highest all year.
Overall, average transaction prices remain about $10,000 higher than in July 2020, as the COVID-19 pandemic gripped the nation. At that time, the average transaction price for new vehicles was $38,563.
“In the face of rising prices, it is becoming more evident that the new-vehicle market is being supported by pent-up demand driven largely by high-net-worth households,” said Cox Automotive Executive Analyst Erin Keating. “These buyers are benefiting from the wealth effect of a healthy stock market and solid wage growth since the pandemic. At the same time, automakers are providing healthy incentives to keep sales flowing. Prices are trending higher, but just as we are seeing in the broader retail markets, there’s sufficient demand and generous incentives out there, and that’s driving the market.”
The volume-weighted average transaction calculation reflects all the car market realities, including high-volume vehicles, like pricey pickup trucks, influencing the number. For example, the report shows that full-sized pickups posted an average transaction price of about $64,790.
Electric vehicle affordability improved in July. Consumers paid an average transaction price of an estimated $55,689, down 4.2% from last year at the same time. The nation’s largest electric vehicle (EV) seller, Tesla, saw average transaction prices drop 9.1% year over year to $52,949.
“The urgency created by the administration’s decision to sunset government-backed, IRA-era EV incentives was expected to create serious demand for EVs in the short term. If last month is any measure: Mission Accomplished. July sales were near an all-time monthly record. At this pace, Q3 will be the best ever and then some, as buyers jump in before the big incentives dry up.”
What Drives New Car Prices
- Inventory availability
- Manufacturer incentives
- Dealer discounts
- Trade-in vehicle value
New Car Inventory Update
According to Cox Automotive’s vAuto Live Market View, new car inventory dropped slightly in July compared with the previous month. Dealerships began August with a 73-day supply of vehicles, a 4.7% drop compared to a year ago, though only 1% less than last month.
Dealerships track the number of new vehicles they have on hand to sell using a metric called “days of inventory,” or how long it would take them to sell out at today’s sales pace if they stopped adding new vehicles.
If you’re out shopping right now, you’ll likely find plenty of vehicles from Land Rover, Ram, Lincoln, Audi, and Mitsubishi, though you’re less likely to find the exact model you may want from Toyota, Lexus, and Honda. Those carmakers have fewer vehicles in stock at dealerships overall.
As new 2026 models start pouring in, dealerships need to get rid of the 2025 vehicles. For now, carmakers appear to be holding the line on tariff increases.
Shoppers heading out to purchase a new vehicle should closely monitor dealership pricing amid fluctuating tariffs. While automakers set the stage for pricing, dealers ultimately close deals. They could easily add markups or higher dealer fees to compensate for any losses they could incur due to tariffs along the way.
For now, we suggest new car buyers search for incentives and cash-back deals and expand their shopping boundaries to find the right deal for their budget. Qualified buyers with stellar credit will discover low-interest-rate offers and lease deals, including on electric vehicle models, some of which lose the $7,500 federal tax credit on Sept. 30.
Credit-worthy buyers can secure deals on SUVs, like a 2025 Nissan Rogue with 0% APR financing for up to 60 months, good through Sept. 2. Additionally, $1,750 cash back is available.
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 those prices higher, giving credence to the idea that buying a new vehicle could sometimes be cheaper than purchasing a certain used model, 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. On the flip side, they’re more likely to offer an excellent deal to buyers on a car that fewer people are looking for currently. In other words, a car shopper trading a 2018 Honda Civic for something else will be much happier with the trade-in appraisal than one with a 2021 Jeep Grand Cherokee.
Car buyers should prepare to shop their trade-in around. It’s slightly more complicated to pull off, 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 the other is not unheard of when shopping around for a vehicle.
The Higher Costs of Car Insurance
With tariffs on imported cars and some car parts, it’s likely auto insurance rates will climb higher, even as car owners are already stretched to their limits on insurance costs. According to the Bureau of Labor Statistics, car insurance costs were 5.3% higher in July than a year earlier. Bankrate says car insurance costs an average of $2,679 a year for full coverage. Full coverage, called comprehensive car insurance, covers natural disasters like wildfires, hurricanes, floods, and accidents. Before you seal the deal and sign anything for a new vehicle, compare quotes for car insurance.
What to Expect: Looking Ahead
Looking ahead, expect a chaotic car-buying future. Economists initially forecast two interest rate cuts in 2025, after three last year. However, it’s anyone’s guess what could come, or nothing at all could happen. At the Federal Reserve meeting in July, the nation’s central bank held rates steady.
Cox Automotive analysts expect new car prices to break the $50,000 barrier later this year.
“The auto industry is clearly under pressure. Tariffs are increasing costs across the board for automakers, dealers, and consumers — not only for new vehicles, but for aftermarket parts and insurance costs,” said Cox Automotive’s Keating. “As Cox Automotive has noted, tariffs on automobiles and automobile parts contribute to inflation and pose a challenge for an industry already facing stagnant growth, partly due to affordability issues.”
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What to Do If You Need a Car Now
If shopping now, look for overstocked 2025 models that car dealerships want to sell quickly to make room for the incoming 2026 vehicles. Manufacturers appear to be holding the line on sharply increasing prices due to tariffs, and that’s great news if you’re in the market to buy a new car right now. Before buying:
- Research your options and expand your boundaries if needed.
- Look for deals, especially on 2025 models, as 2026 vehicles start pouring in.
- Shop ahead for a car loan if you’re not paying cash.
RELATED: Paying Cash for a Car in 2025: Consider the Pros and Cons
Editor’s Note: This article has been updated for accuracy since it was initially published.
