The automotive market has been in a weird spot so far in 2026. Between rising prices and what seems like never-ending supply chain issues, consumers are rethinking their purchasing habits. While total car sales have seen remarkable strength given the turbulent last 12 months, many potential buyers are now going used to save money. Meanwhile, some are just staying away entirely, holding onto their vehicles longer than ever.
The Q1 2026 CarGurus Intelligence Report reveals more on exactly how the current economic climate is playing out on dealership lots. Buyers are actively adapting their strategies to find better value, fundamentally altering inventory across the country.
The Affordability Crunch: New vs. Used
Softening New Car Sales and the Shift to Used Vehicles
Affordability remains the central challenge for shoppers in 2026. Buyers are doing their best to save by migrating toward the used vehicle market to find relief from high sticker prices. However, they still want something that resembles a new car. Sales of nearly new used vehicles, categorized as two years old or younger, were up 24% year-over-year. This specific segment powered the bulk of the used market’s growth during the first quarter as customers could find great deals on vehicles that still had most of the new technology baked into 2026 models.
Simultaneously, a lack of affordable new inventory is driving a noticeable decline in new sales. The data shows a direct correlation between price constraints and slower showroom traffic. In fact, vehicles priced under $40,000 accounted for roughly 95% of the total decline in new vehicle sales.
The shift toward higher-margin models by manufacturers has severely squeezed affordable supply. Five years ago, new vehicles priced under $30,000 represented over 30% of total industry inventory. That figure has plummeted by 60% since 2021. This sharp drop leaves budget-conscious shoppers with significantly fewer options, driving them directly into that nearly new used market where depreciation absorbs some of the financial impact.
Market Days Supply (MDS) trends
Inventory supply has stabilized considerably compared to the pandemic-era shortages, but new vehicles are now sitting on lots significantly longer. The New Market Days Supply (MDS) reached 72.6 days in March 2026. This metric sits well above the industry target of 60 days and a stark contrast to the severely depleted 27.4 days recorded in March 2022.
Higher-priced vehicles are, understandably, encountering the most friction. For example, the $70,000 to $80,000 price band currently carries a MDS of 87.7 days. By comparison, sub-$30,000 vehicles maintain a relatively tighter MDS of 63.2 days, there just aren’t too many of them to go around. At the extreme end of the spectrum, models like the Dodge Charger are experiencing a staggering 829 days of supply, a number that feels like it should be a typo.
The Surge in Gas Prices and its Ripple Effect
As we are all painfully aware right now, economic pressures extend well beyond vehicle sticker prices. In March, national gas prices surged by over $1 per gallon, breaching the $4 mark for the first time since 2022. This rapid price shock squeezed already-stretched consumer budgets and immediately altered shopping behavior.
With no immediate end in sight, and as the total cost of ownership climbs, buyers are aggressively prioritizing fuel efficiency to offset their daily expenses. The CarGurus data indicates that consumers reacted almost instantly to pain at the pump, adjusting their search filters and vehicle preferences to favor models that offer long-term savings. If high gas prices continue it will create an extremely favorable environment for alternative powertrains.
The share of views for new EV listings on CarGurus increased by 31% over the last month, while new hybrid views grew by 16%. The used market saw even larger gains, with used EV views jumping 40%.
Electric Vehicles (EVs) and Hybrids: A Shifting Landscape
While new EV sales remain depressed following the expiration of federal tax credits in late 2025, the used market is actually seeing growth. Used EV sales climbed nearly 30% year-over-year. Buyers will readily adopt electric options when the initial purchase price aligns with their budgetary constraints.
Affordable pricing remains the absolute key to converting EV curiosity into actual sales. The Tesla Model Y leads the used electric segment with an average list price of $30,100. Other standout performers include the Hyundai Ioniq 5, which averages $25,500 and saw a remarkable 152.7% year-over-year sales increase. The Chevy Equinox EV also captured significant market share, averaging $26,200 and posting massive sales growth.
Notably, hybrids carry the tightest supply of any powertrain category at just 47 days. Toyota completely dominates this high-demand segment, holding the lowest MDS spots across the entire industry. The Grand Highlander Hybrid leads the pack at an incredibly fast 17.0 days of supply, followed closely by the Sienna at 18.4 days.
Navigating the Road Ahead
The market trends that began to appear in 2025 have officially become top of mind for every customer and dealer in 2026. Affordability and fuel efficiency have transitioned from optional preferences to strict purchasing requirements. Shoppers are actively balancing their desire for modern features with the economic realities of simply not having enough cash to consider a brand-new vehicle a smart purchase.
Dealers should consider adapting some of their inventory strategies heading into the summer. Prioritizing nearly new used vehicles and considering stocking up on a few extra accessible hybrid or electric options will be crucial for maintaining healthy turn rates and profitability.
Of course, what works for one dealership in one region may not be right for another, but all over the country there is clear demand for budget-friendly vehicles. No matter how it gets done, if customers can find affordable vehicles, they will still come down to the dealership. Things may be in flux to start the year, but there is no doubt that dealerships can successfully navigate these market shifts and connect with consumers exactly where they want to be shopping.
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