The U.S. automotive market remains in a state of structural supply constraint, keeping used vehicle prices elevated as the industry struggles to recover from a half-decade of production shortfalls. According to Cox Automotive, approximately 8 million vehicles that would have been produced for U.S. buyers between 2020 and 2022 were never manufactured, creating a permanent supply deficit that continues to ripple through the used car market.
Why Are Used Car Prices Still High?
The current pricing environment is a direct result of a "mousetrap" effect, where a shortage of new vehicle sales limits the downstream inventory of used cars. Tyson Jominy, senior vice president at J.D. Power, explains that a new vehicle sale acts as the initial catalyst for the entire automotive ecosystem. When fewer new cars enter the market, fewer trade-ins become available for the used market, constricting supply for years.
This supply chain disruption is compounded by a shift in automaker strategy. During the pandemic, manufacturers prioritized the production of high-margin trucks and luxury SUVs over entry-level vehicles. This trend has largely persisted, leaving fewer affordable options for average consumers. According to J.D. Power, the average household income for a new vehicle buyer now exceeds $150,000, significantly higher than the national median of approximately $80,000.
How Have Leasing and Incentives Changed?
Automakers have significantly curtailed leasing and consumer incentives, two traditional drivers of new vehicle volume that also feed the used market. Before the pandemic, leasing accounted for roughly 30% of the new vehicle market, but that figure dropped to a low of 18% in 2022, per Cox Automotive.
Because lease contracts typically span three years, the industry is currently feeling the impact of that 2022 low in the form of fewer off-lease vehicles entering the pre-owned inventory. Furthermore, manufacturers have been hesitant to return to pre-pandemic incentive levels. While discounts averaged about 9.5% of vehicle prices before 2020, they currently hover between 6.5% and 7%, according to industry data.
What Does the Market Outlook Suggest?
The U.S. auto market is experiencing a slow recovery in sales volume, but it remains far below historical benchmarks. The U.S. Bureau of Economic Analysis reported 16.2 million vehicle sales in 2025, an improvement over the 13.8 million recorded in 2022, but still trailing the record 17.55 million sold in 2016.
Industry forecasts for 2026 suggest a plateau:
- Cox Automotive: Projects approximately 15.8 million unit sales.
- J.D. Power: Predicts a slightly more optimistic 16.3 million unit sales.
Jeremy Robb, chief economist at Cox Automotive, notes that the market is unlikely to see a dramatic shift in supply over the next three to four years. As a result, consumers are increasingly seeking older, cheaper vehicles. Data shows heightened demand for cars aged 9 to 10 years, a segment that traditionally did not face such intense pricing pressure. This trend confirms that buyers are trading down to manage the combined impact of high vehicle prices, inflation, and stagnant wage growth.
Market Comparison: 2016 vs. 2026
| Metric | 2016 (Peak) | 2026 (Projected) |
|---|---|---|
| Annual Sales Volume | 17.55 Million | ~16.0 Million |
| Market Condition | High Supply | Constrained Supply |
| Incentive Levels | ~9.5% | 6.5% – 7% |
Sources: Bureau of Economic Analysis, Cox Automotive, J.D. Power.