Record January New-Vehicle Prices Mark Shift as Automakers Reduce Incentives

Kelley Blue Book Report: January 2026 Vehicle Price Surge

In January 2026, Kelley Blue Book announced that new-vehicle prices surged to an unprecedented high for the month, breaking the previous record set in January 2023. The average transaction price (ATP) for new vehicles reached $49,191, marking a 1.9% increase from the same month last year. Despite the price hike, this figure represents a 2.2% decline from December 2025's record, illustrating the typical seasonal adjustments that occur after a bustling year-end sales period when high-end luxury vehicles dominate sales.

Among the overarching narratives is a strategic retreat by automakers from sales incentives, reflecting their efforts to preserve profit margins. The average incentive package in January was about 6.5% of the ATP, equivalent to roughly $3,200. This is notably down from 7.1% a year prior and 7.5% in December, the peak of 2025. Incentives were particularly robust for luxury vehicles and full-size pickup trucks, with smaller segments like full-size SUVs and compact cars seeing significantly lower incentive rates.

In terms of vehicle categories, compact SUVs such as the Toyota RAV4 and Honda CR-V remained the best sellers, recording an ATP of $36,414, which is slightly down from previous year levels. This trend emphasizes the availability of budget-friendly models that offer value while remaining more than 25% below the industry average.

Another notable shift in the marketplace is the absence of new vehicles priced under $20,000, with the affordable Nissan Versa now holding the title of the least expensive model at an MSRP of $22,315. However, this competition is likely to diminish soon as production of the Versa reportedly ceased in December.

Full-size pickups continue to defy trends with average prices surpassing $70,000 for five consecutive months, leading to sales of over 150,000 units in the past month. In stark contrast, the subcompact car segment, which averaged less than $26,000, struggled to attract buyers, selling less than 4,000 units in January.

Insights from Experts

Erin Keating, an Executive Analyst at Cox Automotive, noted that the January pricing dynamics underscore the importance of market mix. "We observed a new high for January, even as consumer prices typically retract from a December robust performance. The consumer market continues to showcase options below average industry pricing, particularly in dominant segments like compact SUVs. However, the diminishing presence of entry-level vehicles is driving the pricing floor upwards. High demand persists for luxury and full-size vehicles, further skewing average prices upwards," Keating remarked.

Electric Vehicle Market Trends

Electric vehicles (EVs) also experienced price adjustments, with averages reaching $55,715 in January – a decrease of 0.6% from the previous year and 3.1% from December. EV incentives also decreased to an average of 12.4% of ATP, notably down from 18.3% in December, indicating fluctuating consumer interest.

Tesla led the market, comprising around 60% of EV sales with an average transaction price of $52,628, which reflects a decline from $53,678 the previous month. The EV segment saw estimated sales of just over 66,000, representing a substantial decrease of nearly 30% year-over-year and a 20% drop from December figures.

Despite price hikes, automakers remain optimistic, navigating the balance between consumer preferences and profit margins as they adapt to market conditions. The ongoing transformation in vehicle pricing strategies, combined with evolving consumer expectations, sets the stage for an exciting year ahead in the automotive industry.