US new-car market weighed down by multiple factors

26 January 2026

The US new-car market is projected to experience a muted January. This comes as electric vehicle (EV) sales are set to remain depressed in the wake of incentive halts. J.D. Power reveals its latest market expectations.

Total new-vehicle sales in the US, including retail and non-retail transactions, are projected to reach 1,118,700 units in January. This marks a year-on-year decrease of 2.7%.

January has 26 selling days, one more than 12 months prior. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 1.2% from 2025.

The seasonally adjusted annualised rate (SAAR) for total new-vehicle sales is expected to be 15 million units, down 0.4 million units from January 2025.

New-vehicle retail sales for January 2026 are projected to reach 908,500, a 3.7% decrease from the same month last year. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 0.1% from 2025.

The SAAR for retail new-vehicle sales is expected to be 12.7 million units, down 0.5 million units from January 2025.

Modest US January performance

‘January is historically the lowest volume sales month of the year and is also historically the least indicative of full-year sales performance,’ said Thomas King, president of the data and analytics division at J.D. Power. ‘Nevertheless, January opens 2026 with a modest performance, with retail sales expected to increase by 1,317 units compared to a year ago.

‘As with every January, winter storms have the potential to create some disruption to sales patterns, but the key factors in assessing January’s performance are the co-mingling of lower EV sales, higher incentives on internal combustion engine (ICE) vehicles and ongoing profit pressure from tariffs.’

It is projected that EV sales will account for just 6.6% of new retail sales in January. This is down 2.9 percentage points (pp) compared with 12 months prior. These sales remain depressed as transaction prices increase. This is occurring due to the elimination of federal credits and reduced incentives from manufacturers.

‘Conversely, manufacturers are using some of the money saved from selling fewer EVs with extremely large discounts to improve discounts on ICE vehicles,’ added King.

‘Finally, tariffs remain a meaningful challenge for manufacturers, who must balance per unit profitability against the need to remain competitive in the marketplace.’

New-vehicle price increases across the board

The average new-vehicle retail transaction price in January for all vehicles is expected to reach $45,880, (€38,677) up $512 or 1.1% from January 2025.

Removing EVs from this calculation, the average price rose 0.9% to $45,510. In contrast, the average price for EVs only rose 18.1% from January 2025 to $51,981.

Regarding total consumer spending on new vehicles, elevated transaction prices in January were enough to offset the lower sales pace. Consumers are on track to spend nearly $39.7 billion on new vehicles this month, 1.4 % higher than a year ago.

For retailers, profit per unit, which includes vehicle gross, finance and insurance income, is expected to be $2,148. This is down $62 from January 2025, but up $224 from December 2025. Total aggregate retailer profit from new-vehicle sales for this month is projected to be $1.9 billion, down 2.6% from last year.

‘Affordability pressure remains significant, with the average monthly finance payment reaching $760, up $24 from a year ago,’ stated King. ‘In response, more consumers are turning to 84-month loan terms, which are expected to account for 11.7% of financed sales this month compared to 9.9% a year ago.

‘The average manufacturer’s incentive spend per vehicle is on track to reach $3,192, which is $25 higher than a year ago. However, the changes in average discounts are heavily influenced by the decline in EV sales. Discounts on EVs are expected to average $11,212 in January, down $1,820 compared with January 2025, and down $353 from December 2025,’ he continued.

‘Discounts on non-EVs are projected at $3,004, an increase of $403 from last year. As a share of MSRP, discounts on non-EVs averaged 5.9% in January, up 0.8pp from a year ago.’

Strong US used-car prices

Easing interest rates and strong used-vehicle values are providing some relief to buyers facing elevated monthly payments. The average interest rate for new-vehicle loans in January is 6.3%, a decrease of 48 basis points from a year ago.

‘The average used-vehicle price is $28,550, up $490 from a year ago,’ said King. ‘This reflects the continued low supply of recent model-year used vehicles due to lower new-vehicle production during the pandemic, fewer lease maturities, and manufacturers moderating discounts.

‘The ongoing strength of used-vehicle prices continues to be good news for new-vehicle buyers with a trade-in, with average trade-in equity in January at $8,091, up $293 year from January 2025. The number of new-vehicle buyers with negative equity on their trade-in is expected to reach 27.3%, an increase of 2.4pp from the same point last year.’

Despite a muted start to 2026, the full-year outlook remains relatively positive. This is boosted by rising lease-return volumes, coupled with the anticipation of lower interest rates.

‘More importantly, as OEMs and dealers navigate the evolving economics of EVs, there is likely to be an opportunity to improve affordability of ICE vehicles as production schedules shift towards a more profitable mix of vehicles for both. Similarly, supply chain changes present the opportunity to partially mitigate tariffs, although tariff-related profit pressure for manufacturers will persist throughout the year,’ concluded King.

Sales details

• Fleet sales are expected to total 210,247 units in January, up 1.9% from January 2025. Fleet volume is expected to account for 18.8% of total light-vehicle sales, up 0.9pp from a year ago.
• ICE vehicles are projected to account for 77.7% of new-vehicle retail sales, an increase of 2.7pp from a year ago. Plug-in hybrid vehicles (PHEVs) are on pace to make up 0.9% of sales, down 1.3pp from January 2025.  EVs are expected to account for 6.6% of sales, down 2.9pp, and full hybrids are expected to account for 14.7% of new-vehicle retail sales, up 1.4pp.
• US final assembly vehicles are expected to make up 54.1% of sales in January, up 3.2pp from a year ago.
• Trucks and SUVs are on pace to account for 83.1% of new-vehicle retail sales, up 1.5pp from January 2025.

Retail details

• Retail inventory levels are currently at 2.12 million units, a 1.4% decrease from January 2025.
• The industry’s inventory days of supply is 59 days in January, up two days from a year ago.
• The average new-vehicle retail transaction price in January is expected to reach $45,880, up $512 from January 2025. Transaction price as a percentage of MSRP was down 0.2pp from a year ago at 89.5%.
• Retail buyers are on pace to spend $39.7 billion on new vehicles, up $0.5 billion from January 2025.
• Average incentive spending per unit in January is expected to reach $3,192, up $25 from January 2025. Incentive spending as a percentage of the average MSRP is expected to decrease to 6.2%, flat from January 2025.
• Average incentive spending per unit on trucks and SUVs in January is expected to be $3,399, up $104 from a year ago, while the average spending on cars is expected to be $2,596, up $36 from a year ago.
• Leasing is expected to account for 21.7% of sales this month, down 2.1pp from a year ago.

Dealer details

• The average time a new vehicle remains in the dealer’s possession before sale is expected to be 57 days in January, which is flat from a year ago.
• 25.1% of vehicles sold in less than 10 days in January, down 4.9pp from a year ago.
• Average monthly finance payments are on pace to be $760, up $24 from January 2025. The average interest rate for new-vehicle loans is expected to be 6.3%, down 0.4pp from a year ago.
• So far in January, average used-vehicle retail prices are $28,550, up $490 from a year prior. Trade-in equity is trending towards $8,091, which is up $293 from a year ago.
• 27.3% of trade-ins are expected to carry negative equity this month, an increase of 2.4pp from January 2025.
• Finance loans with terms greater than or equal to 84 months are expected to reach 11.7% of finance sales this month, up 1.9pp from January 2025.

Climbing hybrid demand amid EV drops

‘The US alternative powertrain sector is entering the new year with performance that closely mirrors late 2025, as electric vehicle share holds steady and hybrid demand continues to climb,’  confirmed Tyson Jominy, senior vice president of data and analytics at JD Power.

‘Early January data shows EV and PHEV penetration running nearly four percentage points below year-ago levels, with ICE vehicles and traditional hybrids absorbing the gains. Both EVs and PHEVs are on track to finish the month below 8% retail share, a notable shift from the nearly 12% combined share recorded last January.

‘Automakers are responding to these dynamics with elevated incentive activity, particularly in the EV segment. EV incentive spending is highest in the industry, climbing more than $2,000 from a year ago as manufacturers work to offset the loss of federal tax credits. January month-to-date spending is roughly $5,700 per vehicle, only a few hundred dollars above PHEVs, but nearly $3,500 above hybrids,’ added Jominy.