New Car Sales Hit 14-Month Low as Storms, High Prices Slow Demand

Published: February 18th, 2026

New light-vehicle sales fell to a seasonally adjusted annual rate of 14.85 million units in January, marking the weakest month for the U.S. auto market since January 2024, according to the National Automobile Dealers Association’s latest Market Beat report. The 4.1% year-over-year decline came as severe winter storms disrupted dealer traffic across multiple regions during the month’s second half, compounding broader market softness that has dealers and automakers rethinking their strategies heading into spring.

The slowdown arrives despite record-high transaction prices and signals that consumers are increasingly stretched by costs that have climbed steadily since the pandemic. Average prices hit $49,191 in January—a new record for the month—even as dealers boosted incentive spending to $3,335 per vehicle, up 5.6% from a year earlier.

Key Takeaways

• Affordability is now the biggest constraint on the auto market. Prices remain near record highs, pushing many consumers out of the new-car market.
• The disappearance of true entry-level vehicles is structurally raising the price floor, with no new models available under $20,000.
• EV demand dropped sharply after federal tax credits expired, showing adoption is still highly dependent on incentives.
• Hybrids are gaining favor as a practical middle ground, offering fuel savings without EV cost or charging concerns.
• Used-car demand is surging as buyers look for more affordable alternatives to expensive new vehicles.
• Automakers are cautiously increasing incentives, but tight inventory is preventing a return to the heavy discounting seen before the pandemic.
• Dealers are shifting focus toward hybrids and used vehicles to sustain sales while navigating softer demand in early 2026.

Weather and affordability squeeze dealers

Severe weather in mid-to-late January forced dealerships across the South and Midwest to close temporarily, cutting into what’s typically a slower sales period. But industry analysts say the storms only accelerated a trend already underway: consumers pulling back as vehicle affordability remains strained.

Transaction prices have now stayed above $50,000 for ten consecutive months through December 2025, before dipping slightly to $49,191 in January. That’s still up 1.9% from January 2025, with no new vehicles available under $20,000. The cheapest option on dealer lots is the Nissan Versa at $22,315.

“January’s pricing story is really a reminder of how much mix still matters in this market,” said Erin Keating, executive analyst at Cox Automotive. “We hit a new January high even as prices naturally pulled back from December’s luxury-heavy finish. Consumers are still finding plenty of options below the industry average, especially in core segments like best-selling compact SUVs, but the disappearance of true entry-level vehicles continues to lift the floor higher.”

Compact SUVs like the Toyota RAV4 averaged $36,414 in January, down 0.4% year-over-year, making them relative bargains in a market where luxury vehicles have dominated the sales mix.

Incentives rise but remain below pre-pandemic norms

Automakers increased average incentive spending to $3,335 per unit in January, representing 6.6% of the manufacturer’s suggested retail price. While that’s up from a year earlier, it’s still well below the roughly 10% discounts that were common before the pandemic disrupted supply chains in 2020.

The gap suggests dealers and manufacturers have room to increase discounts further to stimulate demand, though inventory constraints may limit how aggressive they can be. Total new-vehicle inventory stood at 2.53 million units at the end of January, down 9.2% year-over-year and 2% from December. Industry forecasts project inventory will remain between 2.5 million and 2.6 million units through the first half of 2026 before increasing later in the year.

Incentive spending dropped 5.5% from December’s levels, when year-end clearance events typically drive higher discounts. The January pullback reflects both seasonal patterns and automakers’ efforts to protect margins amid tighter inventory.

Electric vehicle sales crater without tax credits

Battery electric vehicle sales plunged nearly 30% year-over-year to roughly 66,000 units in January, with market share falling to 6.6%—a 1.9 percentage-point decline from January 2025. The drop reflects the absence of federal EV tax credits, which expired at the end of 2025 and had provided up to $7,500 in purchase incentives.

Average transaction prices for EVs fell to $55,715, down 0.6% from a year earlier, as automakers increased discounts to offset the lost federal support. Incentive spending on EVs reached 12.4% of transaction prices—nearly double the industry average—though that’s down sharply from December’s 18.3%.

Tesla continued to dominate the EV market with 60% of sales, averaging $52,628 per vehicle. But the broader category’s struggles highlight how dependent electric vehicle adoption has been on government subsidies.

Conventional hybrids, by contrast, captured 12.6% of the market in January, up 0.5 percentage points from a year earlier. Hyundai reported that electrified vehicles—including hybrids and plug-in hybrids—accounted for 30% of its 2025 retail sales, with hybrid sales up 36% over the prior year. Models like the Hyundai Venue and Santa Fe posted gains of 21% and 20%, respectively, as consumers sought fuel efficiency without the range anxiety or charging infrastructure concerns that come with fully electric vehicles.

Used car demand surges as buyers seek affordability

As new-vehicle prices remain elevated, used-car demand hit its highest level in five years. CarGurus’ Used Vehicle Demand Index reached 109.7 in January—the strongest reading since January 2021—up 7.2% year-over-year and 4% from December.

“Used sales demand came out roaring in January, with savvy car buyers taking advantage of a month that typically offers lower prices, higher inventory, and less shopper competition,” said Kevin Roberts, director of economic and market intelligence at CarGurus. “If this trend holds, it could set the tone for a competitive start to the spring selling season.”

Average used-vehicle listing prices stood at $27,800 in January, up 1.5% year-over-year but down 1% from December. Inventory availability rose 5.2% year-over-year, giving buyers more options. Vehicles spent an average of 49.7 days on dealer lots before selling, while overall time to turn inventory stretched to 77.2 days, up 1.3% from December.

The used-market strength provides dealers with trade-in leverage and an alternative revenue stream as new-vehicle sales soften. Roberts noted that despite surging demand, inventory levels continued to rise, suggesting prices could begin climbing in coming weeks as seasonal demand builds toward the spring selling season.

What dealers face next

The NADA report warned that dealers should expect continued challenges in the near term, with lower sales volumes and reduced foot traffic due to both seasonal disruptions and broader market softness. The combination of rising incentive rates and inventory constraints requires strategic planning around allocation and customer demand.

General Motors posted a 6% sales increase in 2025 to 2.85 million units, while Ford reported its best year since 2019, both driven by strong SUV and truck demand. But those gains came before January’s slowdown, and automakers are now watching whether the winter dip proves temporary or signals a more sustained pullback.

Dealers are prioritizing hybrid inventory over EVs given the market shift, while also leveraging used-vehicle demand to maintain traffic and margins. With new-vehicle inventory expected to remain tight through mid-year, the balance between stimulating demand through incentives and protecting profitability will define the first half of 2026.

For consumers, the message is mixed: new-vehicle prices remain near record highs with limited entry-level options, but rising incentives and strong used-car availability offer alternatives. Those considering hybrids face better selection and value than EV shoppers, while buyers willing to shop the used market early in the year may find deals before spring demand pushes prices higher.

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