Should You Buy a Car in 2026?

Auto Market Trends for 2026

What you pay for a car can depend on a lot of different factors. Here's a quick rundown of the biggest ones and how they're expected to play out next year.

Used Car Prices May Hold Steady

Even with some ups and downs throughout the year, the average cost of a used car in November 2025 is roughly the same as it was a year earlier, according to the Manheim Used Vehicle Value Index.

Most vehicle classes became cheaper, with compact cars leading the way with a 6.8% drop in pricing, followed by midsize cars (-4.5%), pickup trucks (-2.6%) and SUVs (-1.6%). However, prices for used electric vehicles increased by 6.1%, while luxury vehicles are 2.9% more expensive.

If these trends continue, used car prices in 2026 may stay fairly steady overall, with some categories—like compact and midsize cars—becoming a bit more affordable. But segments that rose in 2025, including EVs and luxury vehicles, could hold onto higher prices next year.

New Car Prices Are Expected to Keep Climbing

While used car prices have remained relatively stable over the past year, the same isn't true for new vehicles. In September 2025, the average cost for a new car surpassed $50,000 for the first time ever, according to Kelley Blue Book. In November, it dipped back below that threshold to $49,814, which is still a 1.3% increase from the prior year.

The car-buying service CarEdge estimates that new car prices will continue to increase in 2026 at a clip of 2% to 4%, depending on the vehicle you're buying.

Learn more: Is It Cheaper to Buy a New Car or a Used Car?

Auto Loan Interest Rates Are Likely to Improve, But Only Slightly

Auto loan interest rates have declined over the past couple of years, albeit slowly. According to Experian's State of the Automotive Finance Market report for the third quarter of 2025, the average interest rate for new car loans was 6.56%, compared with 7.11% in 2023. For used cars, the average loan interest rate was 11.4%, down from 11.59% two years previously.

The Federal Reserve has implemented three rate cuts through the end of 2025, which will gradually influence interest rates for auto loans and other consumer debt. Because these changes take time to reach borrowers, lower auto loan rates may start to appear in early 2026.

That said, the Federal Reserve Open Market Committee expects only one additional rate cut in 2026, so any resulting savings may be modest.

Learn more: What Is a Good Auto Loan Interest Rate?

Auto Loan Approvals Are High, but Could Tighten Up

The car loan approval rate was 73.6% in November 2025, according to Cox Automotive. The Dealertrack Credit Availability index, which tracks various factors that affect a borrower's access to credit, reached 99.1—the highest for the year so far and the best level since October 2022.

That said, with the broader economy still losing momentum, lenders may begin tightening their credit policies to limit risk exposure. If that happens, approval rates and overall access to auto financing could start to decline in 2026.

Tax Credits Have Expired for Electric Vehicles

Federal tax incentives for electric vehicles changed significantly in 2025. Under the One Big Beautiful Bill Act, the federal EV tax credit—previously worth up to $7,500 for new EVs and $4,000 for used EVs—expired on September 30, 2025, meaning vehicles purchased after that date are no longer eligible for those tax breaks.

This shift could slow EV sales heading into 2026, though some automakers are stepping in with their own discounts to help soften the impact. State and local incentives may still be available, but on the federal level, buyers should expect fewer tax breaks.

Best Time to Buy a Car

If you have the luxury of waiting to buy your next vehicle, there are certain times of the year when you're more likely to get a deal. Some of the best times to buy a car include:

• End of the month: Dealerships typically set monthly quotas for their sales staff. If you can wait until the last few days of the month, you may get lucky and find a salesperson who's motivated to work with you on a price to meet their quota. The end of the quarter can also be a good option as monthly and quarterly sales goals coincide.
• Certain holidays: Dealerships and manufacturers often offer rebates and financing deals on certain holidays. Popular times include Presidents Day, Memorial Day, July Fourth, Labor Day, Black Friday and New Year's.
• New model years: Shortly before a dealership receives the latest iteration of a model, it works to clear out the latest model year to make room. This can result in a variety of incentives that can save you money. That said, there's no universal time of year when new models are released, so you'll need to do some research to determine the right timing based on the car you want to buy.
• Earlier in the week: Weekends are typically busy for car dealerships because that's when most workers have time to shop for a car. If you have some flexibility to go in on a weekday, less competition may give you an advantage in your negotiations. Monday and Tuesday tend to be slower in general.
• End of the calendar year: Dealerships often run end-of-year sales events that can result in significant savings. According to Edmunds, car buyers can enjoy the biggest average discount off the manufacturer's suggested retail price in December, compared to any other month.

That said, some car purchases may be more urgent than others. If you're dealing with a car that's constantly breaking down and you need a more reliable form of transportation for work or school, the best time to buy a car is now.

How to Prepare to Buy a Car

The process of buying a car can take some time, especially if you want to maximize your savings. Here are some steps to get started:

1. Check your credit score. If you're planning to finance your purchase, check your credit score to gauge your creditworthiness. If your credit needs some work and you don't need another car urgently, consider taking steps to improve your score before you proceed.
2. Come up with a realistic budget. Take a look at your income, expenses and savings balance to determine how much you can reasonably afford to spend on a car, including the down payment and ongoing costs. In addition to the monthly loan payment, you'll also want to consider insurance premiums, annual registration fees, fuel or electricity costs and ongoing maintenance and repairs.
3. Research makes and models. Take some time to think about the features you're looking for in a car. Then, research different makes and models to get a better idea of which one would best suit your needs and preferences.
4. Consider new versus used. While the experience—not to mention the smell—of a new car is hard to pass up, make sure your expectations align with your budget. New car loans typically have lower interest rates, but they can still cost more over time due to higher sales prices. But if you can afford a higher payment and want a reliable vehicle, new may be a better choice than used.
5. Shop around for loans. If you're in a hurry, you can rely on the dealer to arrange financing on your behalf. But while dealers typically send your credit application to multiple lenders, the interest rate you get may not be the best out there—in some cases, the higher rate may include compensation for the dealer. So, before you go to the dealership, shop around and compare auto loans from a handful of lenders to ensure you get the best deal available.
6. Head to the dealership. Once you're preapproved for an auto loan, research local dealerships for the model you want and take note of the mileage, prices and other features. Then, head to one of the dealerships to negotiate a deal.
7. Finalize your loan. Whether you get your financing through the dealership or on your own, take steps to finalize the loan, so you can enjoy your new vehicle. Be sure to note when the first payment is due and set up automatic payments from your bank account.

The Bottom Line

If you're thinking about buying a new car in 2026, understanding auto industry trends can help give you more context for what to expect. Regardless of when you decide to purchase a car, monitoring your credit regularly can give you the information you need to build and maintain a solid credit history, making it easier to save money on an auto loan.

In addition to comparing auto loans, it's also a good idea to shop around and compare auto insurance coverage and costs to ensure you're saving as much money as possible on your next car.