High prices threaten to send auto sales into decline this year as middle-class consumers shy away from new-vehicle purchases with stickers near record levels.
While sales are expected to surpass 16 million vehicles for 2025, the annualized rate likely slowed in the final three months to about 15.6 million, down more than 5% from the third quarter, according to industry researcher Cox Automotive. That’s a “large decline” that suggests “a lack of momentum heading into the new year,” Charlie Chesbrough, senior economist at Cox, said on a December call with reporters.
The main culprit is nervousness among consumers making less than $150,000 a year who’ve pulled back because prices have simply gotten too high, underscoring broad consumer angst around the cost of living that persisted throughout 2025. Cox expects the trend to continue this year, forecasting auto sales of 15.8 million vehicles, which would mark the auto industry’s first annual drop since 2022.
The outlook reflects how growing economic inequality is changing the auto industry. New-car sales have soared 45% among households with annual incomes of $150,000 or more since 2019, according to Cox. Yet they’ve plunged 30% in the same period for those earning $75,000 or less, while sales dropped 7% among families with incomes between $75,000 and $150,000.
“The people who can still afford new vehicles are buying what they want: larger premium vehicles,” said Cox executive analyst Erin Keating. “Everyone else, they didn’t downgrade to a compact car, they left the new market entirely, buying either used or hanging onto what they’ve got.”
Most major automakers are expected to detail their fourth-quarter sales on Monday. The Trump administration whipsawed carmakers and shoppers alike last year with new tariffs and moves to gut environmental regulations that had pushed carmakers to sell more electric vehicles.
Fears that duties would drive prices even higher fueled a sales surge early last year before the levies took effect. Yet the import taxes haven’t yet pushed up stickers, in part because automakers are largely absorbing the higher costs and due to moves by the government that have provided carmakers with some relief.
Tariff-driven price hikes would only add to the industry’s affordability challenge. S&P Global Mobility forecasts sales will decline to about 15.9 million vehicles this year, citing cautious consumers and the potential that carmakers will adjust pricing as the main culprits.
Rising Prices
In 2010, the average vehicle sold for less than $30,000. In December 2025, it was nearly $50,000.
Several factors have contributed to the increase. Several automakers have stopped selling smaller, entry-level cars, skewing lineups toward larger vehicles that command higher prices. Carmakers have also added more creature comforts such as touchscreen-laden interiors as well as safety features that help avoid accidents.
Companies also learned to boost profits with lower production during the pandemic, when parts shortages led to plant shutdowns and scarce inventory. Many haven’t returned to the days when they kept close to 100 days’ worth of cars on their dealers’ lots. As a result, there are fewer rebates offered and less haggling by dealers.
Lower interest rates should provide new-car shoppers some relief from punishing monthly payments, Jessica Caldwell, head of insights at industry researcher Edmunds.com, said in a December report.
Consumers priced out of a new car will find more options in the used-car market this year as more cars come off lease, adding fresher inventory to the used-car market, according to Edmunds.
Incentive Spending
Edmunds forecasts auto sales of 16 million vehicles this year. Although down from an estimated 16.3 million in 2025, it’s a healthy level that will help keep factories humming.
If sales do slump, automakers could boost incentives to keep up their momentum, said Tyson Jominy, a senior vice president at researcher JD Power. Companies are pivoting away from trying to sell electric vehicles — often at deep discounts. That frees up incentive dollars they could use to push conventional, gasoline-fueled models, Jominy said.
Should demand “not meet our expectations, they do have a number of pressure outlets they can use,” he said in a December phone call.
Some analysts are more bullish about 2026. AutoForecast Solutions estimates sales will rise to 16.3 million vehicles, up about 100,000 units from last year. Prices will also stay at today’s lofty levels, said Sam Fiorani, AutoForecast’s vice president of global vehicle forecasting.
“As long as the factories are running at healthy levels, we won’t see prices dropping,” he said in an interview.
Welch, Naughton and Coppola write for Bloomberg.
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