Ford Motor vehicles are displayed for sale at the Leif Johnson Ford dealership on June 30 in Austin, Texas.
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The average transaction cost for a new vehicle has reached a record high: $51,109. That’s according to a report out today from the Kelley Blue Book, which is part of the analytics firm Cox Automotive.
That’s about $500 above the last recordset in December 2025.
Car prices have been stubbornly high for years, especially since the pandemic, mainly driven by supply chain issues. And they’ve gotten higher recently, in part thanks to tariffs and to buyers flocking to, and car companies making, larger, fancier vehicles.
Yet there’s a little good news: Cars are getting more expensive … more slowly.
While that $51,109 figure is an all-time high, that’s only up 2.1% in the past year.
“A 2.1% year-over-year increase is actually below inflation,” said Erin Keating, an executive analyst at Cox Automotive who co-authored the report. Between 2012 and 2021, cars got 3.4% more expensive a year on average, she continued.
The Kelley Blue Book’s transaction cost is based on what people wound up paying for a new vehicle — that means whatever’s on the sticker price, plus add-ons for fancier features, and minus any incentives, such as dealer discounts.
It also doesn’t include one other expense that adds to the cost of owning a car: interest on auto loans. The cost of borrowing has risen over the past several years as the Federal Reserve has kept interest rates high in an effort to drive down inflation. Auto loan rates are now about 11% for used vehicles and over 7% for new ones, according to Edmundsa car analytics company.
Keating says all of this can add up to some sticker shock for buyers — partly because people don’t buy cars all that often and can be surprised by how expensive they’ve gotten, and partly because of interest rates.
“I mean, we are seeing a true shift in the percentage of your monthly payment that’s going towards interest versus towards principal,” she said.
Used cars are not a steal
The Kelley Blue Book’s average includes all kinds of vehicles — SUVs, pickup trucks, electric vehicles — from all kinds of auto companies, including Toyota, Subaru, Tesla and Mercedes-Benz.
It doesn’t, however, include used car sales, which normally make up about two-thirds of total sales. Ivan Drury, director of industry insights at Edmunds, crunched those numbers too and found the same trend. “No matter what you’re looking at, the price is up,” he said.
The average used car now costs close to $27,000, 6% higher than last year, according to Cox Automotive. Vehicles that cost less than that are a “sliver” of the industry, Drury said.
Supply chain challenges, including a semiconductor shortage, during the COVID pandemic meant fewer cars got made. Carmakers had to pick and choose which vehicles to prioritize making — they picked their most profitable models. As a result, fewer used vehicles entered car lots in the early 2020s. So today there’s less inventory to choose from.
That’s good for people who already own a car, Drury said. It means people can upgrade to a new car without much additional money up front.
But, he continued, “The consumer that I sympathize with the absolute most? The first-time car buyer.” Those buyers face a steep down payment, with nothing to trade in.
No matter whether buyers are choosing new or used, data from Edmunds shows that in 2026, they have been financing with lower down payments and longer auto term lengths. “We’ve just seen those explode,” Drury said.
A report from Edmunds found that car buyers financed more than ever, taking out loans worth an average of $44,664 in the past quarter. They also found that more than a quarter of car buyers financed using loans with 84-month-long terms — or longer.
The combination of a small down payment — sometimes in the range of $500 or $1,000 — and a lengthy loan term can get really expensive for buyers in the long term, Drury said, especially with high interest rates.
“So people just say, ‘Oh, forget it,’ you know. ‘I’ll just, I’ll just choose the longer term length and put less money down. I’ve got other bills that are pulling at me,'” Drury said.
Why are new cars so expensive?
In part, vehicles cost more because the cost of making them has gone up for automakers. There are now more tariffs on steel and aluminum, as well as on goods imported from Canada. That matters for American automakers who assemble vehicles on both sides of the border. The cost of computer chips (used in sensors and electronics) and copper (used for automotive wiring) has also risen thanks to competing demand from data centers.
But vehicles also cost more because Americans like bigger cars, SUVs and trucks, which tend to come with a higher price tag. The average sticker price for a full-size pickup truck is nearly $72,000, according to the Kelley Blue Book.
American carmakers have largely shifted their gears away from compact sedans. In earnings calls with investors, they’ve often cited American demand for bigger vehicles.
Plus, as analyst Mike Wall at Mobility Global points out, smaller vehicles offer lower margins for carmakers. “They were sort of that loss leader. It gets the eyeballs in the door,” he said.
For the carmakers, they’re not making as much money as they would compared to their bigger vehicles with pricier features.
Drury notes, people appreciate those features. They’ve gotten used to driving with 360-degree cameras, heated seats and parking assist systems. All of these drive up the cost of buying. “No one wants entry-level anymore,” he said. “Everybody goes mid-to-upper trim levels.”
“People love walking up to their car that already has the air conditioner going when it’s 110 degrees outside, and think, ‘You know what? I don’t have to get in here and potentially burn my hands,'” Drury continued. “So as we get accustomed to more features, more options, we naturally kind of pile on, too. And automakers, they’re very aware of that.”
A challenging time for automakers
Over the past few years, “automakers have been under incredible stress,” Keating said. Yes, there are tariffs and other rising production costs. Many also poured money into developing electric vehicle technology, but EVs still only make up a small slice of the U.S. car market. About 6% of new cars sold are electric, according to Edmunds.
And the market for car buyers is smaller. About 16 million people buy new cars every year — about 1 million fewer since the pandemic.
Notably, fewer people in their late 30s and early 40s are buying cars. “They’re just simply holding onto their cars longer,” Keating said. Her hypothesis? “That age group and that cohort is simply just dealing with different household pressures for their money and are making the choice to stay in the vehicles that they have.”
For the most part, the people buying new cars tend to be older and wealthier. Keating said that might be because older drivers are staying on the road longer. “ We have seen this interesting shift towards individuals keeping their licenses longer and therefore more 65 and up, 75 and up individuals are purchasing vehicles than ever before,” she said.
For automakers, a drop in car buyers means they have to compete more with each other for sales.
“At the end of the day, each of these competitors are sharing, trying to go after a pie that isn’t necessarily growing,” Keating said. So instead, “ they’re stealing share from their competitors as opposed to counting on more consumers entering the picture.”
Source: www.npr.org
