Will US new-vehicle retail turn a corner in May?

26 May 2026

A seven-month run of negative new-vehicle retail results in the US is expected to be broken in May. The latest automotive forecast for JD Power reveals what can be anticipated from the market this month.

Total new-vehicle sales, including retail and non-retail transactions, are projected to reach 1,490,900 units in May. This equates to a 5.8% year-on-year increase and a 1.9% incline without adjusting for the number of selling days.

The seasonally-adjusted annualised rate (SAAR) for total new-vehicle sales is expected to be 16.3 million units. This is up 0.7 million units compared with 12 months ago.

New-vehicle retail sales for May 2026 are projected to reach 1,231,900 units, a 6% year-on-year increase. Without adjusting for the number of selling days, this means a 2.1% increase. The SAAR for retail new-vehicle sales is expected to be 13.6 million units, up 0.6 million units.

Positive retail expectations amid headwinds

‘May results reinforce the underlying strong demand for new vehicles’, said Thomas King, president of OEM solutions at JD Power. However, the last three months have seen skewed year-on-year comparisons. This is because of last year’s consumer reaction to the perceived risk of higher prices from vehicle tariffs.

Sales in March and April 2025 were inflated as consumers rushed to showrooms, pulling their purchases forward. But this was paid back in May, with an estimated 63,000 sales moved into the preceding months.

‘This payback effect makes for a flattering year-on-year comparison, but in no way diminishes the impressive sales pace,’ King said. Retail volume is on pace to expand 6% even as buyers continue to navigate elevated payments and persistent affordability headwinds.

Structural affordability pressures

‘Financing conditions are moving in consumers’ favour, but it is not enough to fully offset structural affordability pressure,’ King commented.

The average interest rate on new-vehicle loans is expected to fall 0.47 percentage points (pp) to 6.59%. This would be the lowest May reading in two years. Meanwhile, the average transaction price is effectively flat at $46,023 (€39,548), down 0.2% from a year ago. Even with those tailwinds, average monthly finance payments are climbing 2.8% to $810.

Buyers who purchased at peak prices several years ago, when inventory constraints were severe, are now returning to the market with weaker equity positions. The proportion of trade-ins carrying negative equity has reached 30.4%, up 2.9pp year on year.

Manufacturer discounts

In response, manufacturers are increasing discounts. Average incentive spending per vehicle is trending towards $3,297, a 20.7% increase from a year ago.

However, this is also a product of lapping the tariff payback. There were unseasonal pullbacks in incentive spending last May as manufacturers reduced discounts precautionarily to offset tariff costs.

Incentives as a percentage of the manufacturer’s suggested retail price are expected to hit 6.4%, up 1pp from May 2025. For non‑electric vehicles, average incentive spending per vehicle is trending towards $2,973, a 23.6% increase from a year ago.

Incentive spending on electric vehicles (EVs) remains materially higher. This level is expected to reach $10,308 per unit, up 11.2% from last year. This continues to underscore the role of discounting in supporting EV demand.

Hybrids claim larger retail share

Consumers are using longer loan terms to manage monthly payment affordability. 13.4% of loans now have terms of 84 months or longer, to help fill in part of the affordability gap.

The combination of elevated fuel prices and increased availability of hybrid powertrains is driving a shift in the sales mix. The hybrid share of retail sales has climbed to 16.3%, up 1.6pp. In contrast, the EV share softened to 7% due to the elimination of federal credits.

Volume growth despite flat transaction prices means that total retail consumer expenditure is projected to rise to $54.5 billion. This equates to an increase of $1.1 billion from May 2025.

Lease penetration continues to recover from the post-pandemic drought. 22.6% of buyers are expected to lease in May, up 0.3pp from a year ago. This provides manufacturers with a useful tool to manage monthly payment challenges.