Why car prices are so high these days

Has it been a while since you walked into a new car showroom? Expect some serious sticker shock regarding car prices. The typical MSRP for a new ride these days is in the mid-six figures. Given steeper purchase prices, it’s no wonder many drivers are doing this keep their vehicles longer or opt for used cars.

What’s behind these expensive new vehicle prices? Or what can you expect to pay for a used car today? What factors should you carefully consider before deciding to buy a car? And how can you shave serious dollars off your car transaction? The Zebra shares answers to these and other questions.

How much will it cost to own a car in 2026?

The average transaction price for a new vehicle is currently $49,814, up 1.3% from a year ago, as of November 2025 data from Kelley Blue Book (KBB).

Of course, the price at an outside dealer is not the only cost that must be taken into account. On average, you own and operate one A new vehicle today costs $11,577according to AAA.

Here’s part of how that breaks down:

• The average consumer spends approx $2,449 in gas every year WalletHub reports.
• Furthermore, Americans are now splitting one an average of $838 to repair their carThis is evident from recent data from KBB.
• The average annual rate for full coverage car insurance in the United States is currently about $2,256, based on data from The Zebra.
• Consider that too 61% of American households pay car loansAccording to a recent study by doxoINSIGHTS, these bills account for 9% of total consumer household bills annually. The average monthly car loan bill is $470, for a total of $5,640 per year.

“In addition to the sticker price, buyers should also consider sales tax, title and registration fees, and dealer/documentation fees,” says auto industry expert Lauren Fix, author of Car Coach Reports. “For a typical new vehicle, fees and insurance plus some upfront costs can easily add up to an additional $2,000.”

Why new car prices were so high in 2025

Why do car prices remain so high? The reasons are many, experts agree.

“In 2025, new US tariffs on imported cars and car parts, manufacturers’ costs rose, leading to higher prices for buyers. One analysis estimates that these tariffs could increase car prices by 10%, or add about $5,000 to the average price of a new car,” says Beth Swansonan insurance analyst at The Zebra. “At the same time, the costs of materials and key components – including computer chips – have increased, and persistent supply chain delays continue to slow production and increase costs.”

Rami Sneineh, vice president at Insurance Navy Brokers, points out that the semiconductor shortage during the pandemic has severely hampered production of new vehicles, making recovery difficult.

“Even as factory capacity returned, skyrocketing costs of labor and materials pushed sticker prices even higher than in the pre-pandemic era,” Sneineh explains.

Mandated technology, high interest rates and demand for larger and more advanced vehicles have also contributed to steeper new car prices.

“There is an increasing trend towards larger cars such as SUVs and trucks, which are often more expensive than smaller cars, increasing the average purchase cost,” Sneineh continues.

How used car prices have changed

Do you want to save money on a second-hand set of wheels? KBB indicates that the average used car is currently a list price of $25,945.

If you’re looking for a used vehicle under $15,000, the choices are limited: Dealers only had about 34 days’ worth of inventory at the end of 2025, which is two weeks below the overall industry average. Moreover, the potential tariff price pressure could worsen the situation; many consumers are looking more closely at the used market as new cars become more expensive, further diluting the already scarce used inventory.

Also remember that many motorists leave their cars for longer, because the average car is now on the road 12.8 years old. Consequently, the most attainable used car now typically falls between $15,000 and $30,000.

“Prices continue to rise, with used vehicles from 1 to 5 years old now costing an average of around $31,770 – almost 4% more than last year,” Fix continues. “Overall, the market is still much more expensive than pre-2021 levels, and the gap between new and used prices remains unusually narrow.”

What car buyers should think about

It’s smart to be well prepared before you go to a dealer or make an appointment with a used car salesman. That means:

• Determining your budget and what you can afford.
• Think carefully about the type of car you want to buy and how long you plan to own it.
• And find out if your credit is worth enough to qualify for a better rate and terms if you need financing.

“High car prices combined with higher interest rates mean you’re likely to face larger monthly payments. With average new car loan rates around 7% today, and a typical term of nearly 69 months, affordability is often limited,” says Fix, who adds that financing a $50,000 car at 7% over 60 months will result in a car loan payment of about $1,000 per month – before you consider insurance, taxes and add surcharges.

Additionally, consider the long-term repair and maintenance costs based on your desired make and model. Per one Research from Consumer Reports With the lowest repair and maintenance costs by brand, Tesla tops the list with about $4,035 in total maintenance costs over a ten-year period, followed by Buick and Toyota at about $4,900 each, and Lincoln at about $5,040. Mainstream mass-market brands like Ford, Chevrolet, Hyundai, Nissan, Mazda and Honda also fall on the cheaper side. In contrast, European luxury vehicles tend to be the most expensive: Land Rover could top $19,000 in ten years, Porsche around $14,090, and Mercedes-Benz around $10,525.

“Also remember that the type of vehicle you choose will affect your insurance costs,” Swanson adds. “Older, reliable and safe cars usually cost less to insure than newer luxury models or high-performance sports cars. But only part of your insurance rate is based on the vehicle itself. Your personal factors It matters even more: Things like your age, driving history and where you live play a big role in what you’ll ultimately pay for car insurance.”

Tips to save money on a car purchase

Do you want to spend less on a new or used car? These expert-backed strategies can help reduce costs.

• Shop outside your zip code. Prices can vary widely by location, so expanding your search can help you get better deals.
• Time your purchase carefully. “Dealers are much more motivated to negotiate in the last week of a month or quarter,” says Fix.
• Ask about incentives. Look for manufacturer rebates, special financing or loyalty discounts.
• Avoid expensive extras. “Optional dealer add-ons, especially cosmetic packages and extended warranties, can be extremely expensive,” Sneineh warns.
• Buy lightly used. “The best place is a three-year-old car, preferably a former lease car,” says personal finance expert Paul Walker.
• Check the vehicle history. An inexpensive report can reveal previous accidents or serious damage.
• Size and trim matter. Choosing a smaller or mid-range vehicle can reduce both the purchase price and the cost of ownership.
• Obtain pre-approved financing. Credit unions and online lenders often offer better rates than dealer financing.
• Avoid long loan terms. Shorter loans typically cost more per month but reduce the overall interest paid.
• Do the math on EVs. Higher upfront costs and insurance can offset the fuel savings.
• Consider certified pre-owned or off-lease vehicles. These options can significantly reduce monthly payments with minimal compromises.
• Negotiate the price outside the door. Focus on the total cost, including taxes and fees, and not just the monthly payment.
• Be ready to walk away. If the deal doesn’t feel right, walking away can be your strongest leverage.

This story was produced by The Zebra and reviewed and distributed by Stacker.

RELATED CONTENT: The annual cost of maintaining a new car now exceeds $10,000 – a significant increase from last year