Supply Up, Prices Still High
Used car supply has recovered, with average inventory per dealer rising to levels not seen in a while. Prices have not dropped because demand rose at the same time. Used vehicle demand stayed positive all year, driven by affordability. Buyers want cheaper cars, so they move to the used market. The extra supply, mostly on franchise dealer lots, has not cut prices. New vehicle prices keep climbing, which pushes more buyers toward used cars.
The Vanishing Affordable Car
After the chip shortage, some hoped cheaper cars would return, on the idea that automakers had focused on higher-margin vehicles when chips were scarce. That did not happen. The average list price of a new vehicle in the US topped $51,000 in July, up more than 4% year-over-year and still rising. Vehicles under $30,000 now make up about 10% of listings and are getting hard to find. Under $20,000 is basically extinct. Anyone with a budget under $30,000 is pushed to the used market.
New Sales Hold Up
Even with high prices, new vehicle sales are down only slightly so far in 2026, so buyers are still interested. Supply of vehicles over $70,000 has grown, which may signal a slight slowdown at the very top price range. Leasing is coming back a bit, which should help ease monthly payments for some buyers. The chip shortage tail is nearing its end. That should bring more three- and four-year-old used vehicles into the market and help the certified pre-owned segment, another option for buyers.
Hybrids Take Off, EVs Fall Back
Hybrids are getting the growth many expected electric vehicles to have years ago. US buyers are shedding the gas-guzzler reputation and want more fuel-efficient cars. Price is the main reason hybrids win: the average hybrid price sits much closer to a gas engine vehicle, so buyers pay only a small premium to switch. Electric vehicles stay too expensive, so EV sales are down year-over-year on the new side while hybrids climb.
Hybrid Supply Runs Tight
Some of the strongest demand is in hybrids, sitting at just above two weeks of supply. Whether automakers keep up depends on the brand. Toyota (TM) runs especially tight market day supply on hybrids. More automakers are shifting plans to build more hybrids after leaning EV-heavy in past years, so hybrid supply should keep growing. Demand has stayed strong all year, and gas prices have added to it, even though gas has come down from recent highs.
What to Watch: Affordability and Tariffs
Affordability remains the top trend for the rest of the year. Tariffs were the big word of 2025. Now 2027 model years are reaching dealer lots. The key question: will prices rise on those 2027 models? Automakers have mostly absorbed the cost of tariffs so far. The thing to watch is whether they start passing those costs on to buyers more widely.
These views come from Kevin Roberts, director of economic and market intelligence at CarGurus (CARG).
