By Ray Birch
SANTA MONICA, Calif. — After years of volatility, the U.S. new-vehicle market is settling into what Edmunds describes as a more sustainable rhythm — but one defined by persistent affordability constraints that continue to reshape borrower behavior and lending risk.
Edmunds projects 16 million new-vehicle sales in 2026, slightly below an estimated 16.3 million in 2025, reflecting a market that has normalized inventory levels, pricing discipline, and days-to-turn after the disruptions of recent years. For auto lenders, the outlook points to steady volume — but limited upside — driven by real demand rather than incentives or fleet activity.
The dominant challenge remains affordability, which Edmunds says has created a “K-shaped” market dividing buyers who can absorb today’s pricing from those who cannot.
Higher-income consumers continue to anchor new-vehicle demand, gravitating toward larger, higher-priced SUVs and trucks with little evidence of trading down. Price-sensitive shoppers, meanwhile, are increasingly pushed out of the new-vehicle market altogether as monthly payments remain elevated.
That divide is showing up clearly in the data. Through November 2025, vehicles priced above $70,000 turned in an average of 61 days, nearly identical to vehicles priced below that threshold. Luxury loyalty also remains intact, with 64.2% of luxury buyers trading into another luxury vehicle, nearly unchanged from 2024. Cars accounted for just 17% of total sales in 2025, while midsize sedans fell further to a 4.5% market share.
For lenders, the message is clear: credit demand remains strongest at the higher end of the income and price spectrum, while affordability pressures continue to suppress entry-level volume.
At the same time, the market’s newfound stability is being supported by healthier fundamentals. Edmunds notes that the industry is no longer relying on aggressive leasing or fleet sales to prop up volume, nor are consumers routinely paying above MSRP. Instead, 16 million units now represents a sustainable pace, anchored by normalized supply and pricing discipline.
Looking ahead to 2026, Edmunds outlines a mix of headwinds and tailwinds likely to shape auto lending performance. Economic uncertainty, rising material costs, tariffs, and pull-ahead demand from early 2025 could soften growth. Offsetting those pressures are lower interest rates, a return of lease maturities, stable days-to-turn, and an aging vehicle fleet that continues to pull owners back into the market.
Three trends stand out for lenders.
First, new-vehicle prices are expected to remain elevated but stable. Transaction prices have leveled off after years of rapid increases, and while tariff-related costs could add pressure, their impact has been more muted than expected. The more meaningful shift for lenders is on the rate side: average APRs dipped to 6.6% in November, the lowest point of 2025, and are expected to ease further in 2026. While that may provide modest payment relief, Edmunds cautions that strong credit will remain essential to securing favorable terms.
Second, EV market share is expected to decline in 2026, slipping to around 6%, down from an estimated 7.5% in 2025, following the expiration of the federal EV tax credit. EV lease penetration has already fallen sharply, from 71% in September to 53% in November, underscoring how payment-sensitive the segment has been. Average monthly payments on new EVs remain high at $712, keeping many mainstream buyers on the sidelines even as more affordable models are expected to enter the market.
Third, off-lease inventory is poised to rebound, restoring a critical source of near-new used vehicles that was largely absent in 2025. Lease activity rebounded in 2023, and the resulting returns in 2026 should expand affordable options for consumers priced out of new vehicles — a shift likely to influence used-vehicle demand, residual values, and credit mix across portfolios.
Edmunds’ bottom line for lenders: the auto market is stabilizing, but affordability will remain the defining force in 2026. Higher-income borrowers will continue driving new-vehicle lending, while increased off-lease supply reshapes used-vehicle demand. The months ahead point to steady, disciplined volume — not a return to the high-growth conditions of the past.