Ford Motor vehicles are displayed for sale at the Leif Johnson Ford dealership June 30 in Austin, Texas.
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Brandon Bell/Getty Images
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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 released today by Kelley Blue Book, part of the analytics company Cox Automotive.
That’s about $500 more than the last record, set in December 2025.
Car prices have been stubbornly high for years, especially since the pandemic, mainly due to supply chain issues. And they’ve been rising recently, thanks in part to tariffs, an influx of buyers and automakers making bigger, more luxurious vehicles.
However, there is a little good news: cars are becoming more and more expensive… more slowly.
While that $51,109 figure is an all-time high, it’s only a 2.1% increase over the past year.
“A 2.1% year-over-year increase is actually below inflation,” said Erin Keating, executive analyst at Cox Automotive and co-author of the report. Between 2012 and 2021, cars became 3.4% more expensive on average per year, she continued.
Kelley Blue Book’s transaction cost is based on what people ended up paying for a new vehicle — that means everything on the sticker, plus add-ons for fancier features, and minus incentives, such as dealer discounts.
It also doesn’t include another expense that adds to the cost of car ownership: interest on auto loans. The cost of borrowing has increased in recent years as the Federal Reserve has kept interest rates high in an effort to lower inflation. Auto loan rates are now about 11% for used vehicles and more than 7% for new vehicles, according to Edmunds, an auto analytics company.
Keating says all of this can create shock for buyers – partly because people don’t buy cars very often and may be surprised by the price they got, and partly because of interest rates.
“I mean, we’re seeing a real shift in what percentage of your monthly payment goes toward interest versus principal,” she said.
Used cars are not a bargain
The Kelley Blue Book average includes all types of vehicles – SUVs, pickup trucks, electric vehicles – from all types of automakers, including Toyota, Subaru, Tesla and Mercedes-Benz.
However, this does not include used car sales, which normally make up around two-thirds of total sales. Ivan Drury, director of industry research at Edmunds, also analyzed these numbers and found the same trend. “No matter what you look at, the price is going up,” he said.
The average used car now costs nearly $27,000, 6 percent more than last year, according to Cox Automotive. Vehicles that cost less are only a “slice” of the industry, Drury said.
Supply chain challenges, including a shortage of semiconductors, during the COVID pandemic have led to a decrease in car production. Automakers had to choose which vehicles to make first – they chose their most profitable models. As a result, fewer used vehicles entered parking lots in the early 2020s. So there are fewer choices in stock today.
It’s good for people who Already own a car, Drury said. This means people can upgrade to a new car without much extra money up front.
But, he continued, “The consumer I empathize with the most? The first-time car buyer.” These buyers must pay a large deposit, with nothing to exchange.
Whether buyers choose new or used, Edmunds data shows that in 2026, they financed with lower down payments and longer car lease terms. “We just saw them explode,” Drury said.
An Edmunds report found that car buyers financed more than ever, taking out loans worth an average of $44,664 over the last quarter. They also found that more than a quarter of car buyers were financed with loans lasting 84 months or longer.
The combination of a small down payment — sometimes on the order of $500 or $1,000 — and a long loan term can get very expensive for long-term buyers, Drury said, especially with high interest rates.
“So people just say, ‘Oh, forget it,’ you know. ‘I’ll just, I’ll just go the longer term and put less money aside. I have other bills that appeal to me,'” Drury said.
Why are new cars so expensive?
Vehicles cost more in part because their manufacturing costs have increased for automakers. There are now more tariffs on steel and aluminum, as well as products imported from Canada. That’s important for U.S. 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 increased due to competing demands from data centers.
But vehicles also cost more because Americans as larger cars, SUVs and trucks, which tend to have a higher price tag. The average price of a full-size pickup truck is nearly $72,000, according to Kelley Blue Book.
American automakers have largely shifted gears far compact sedans. On earnings calls with investors, they often cited U.S. demand for larger vehicles.
Plus, as Mobility Global analyst Mike Wall points out, smaller vehicles offer lower margins for automakers. “They were kind of this loss leader. It draws eyes in the door,” he said.
For automakers, they don’t make as much money as they would compared to their larger, more expensive feature-packed vehicles.
Drury notes that people like these features. They have become accustomed to driving with 360-degree cameras, heated seats and parking assistance systems. All this increases the cost of purchase. “Nobody wants entry level anymore,” he said. “Everyone upgrades to mid and higher trim levels.”
“People love to walk out to their car that already has the air conditioning on when it’s 110 degrees outside and say, ‘You know what? I don’t need to come in here and risk burning my hands,'” Drury continued. “So as we get used to more features, more options, we naturally add to that as well. And the automakers are very aware of that.”
A difficult time for car manufacturers
Over the past few years, “automakers have been under incredible stress,” Keating said. Yes, there are tariffs and other rising production costs. Many have also invested money in developing electric vehicle technology, but electric vehicles still represent only a small share of the U.S. auto market. About 6% of new cars sold are electric, according to Edmunds.
And the car buyer market is smaller. About 16 million people buy new cars each year, about 1 million fewer since the pandemic.
It’s worth noting that fewer people in their late 30s and early 40s are buying cars. “They’re just keeping their cars longer,” Keating said. His hypothesis? “This age group and cohort are simply facing different family pressures for their money and making the choice to stay in the vehicles they have.”
For the most part, new car buyers are older and wealthier. Keating said that could be because older drivers are staying on the road longer. “We’ve seen an interesting development where individuals are keeping their licenses longer and, as a result, more people 65 and older, 75 and older, are buying vehicles more than ever before,” she said.
For automakers, a decline in car buyers means they have to compete more each other for sales.
“At the end of the day, each of these competitors is sharing themselves, trying to tackle a pie that’s not necessarily growing,” Keating said. Instead, “they are stealing share from their competitors instead of relying on more consumers.”
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